Asian Stocks Rebound With Earnings, Data in Focus: Markets Wrap

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(Bloomberg) — Asian stocks advanced, as the focus shifted from Middle East tensions to company earnings and economic data for insight into the direction of central bank policy.

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Shares in Hong Kong outperformed with the benchmark gaining more than 2%. Gauges across the region recouped some of last week’s slide as traders took comfort in the absence of further escalation from Iran following Israel’s retaliatory strike.

Mainland Chinese shares opened mixed as the country’s lenders kept the loan prime rates steady. Most Asian chip stocks slumped after Nvidia tumbled 10%, the most in four years. Contracts for US equities edged higher after the Nasdaq 100 Index ended Friday with a 2.1% loss.

The dollar was weaker and the yield on 10-year US Treasury yields advanced as haven demand let up slightly. Investors over the world are recalibrating their positions after stronger-than-expected US data forced the Federal Reserve to reset the clock on its first interest rate cut.

“We are seeing a relief rally underway this morning as geopolitical risks subside,” said Kyle Rodda, a senior market analyst at Capital.com in Melbourne. “The move basically squares the ledger now and allows the markets to go back to focus on macroeconomic and corporate fundamentals.”

US growth and the Fed’s preferred measure of inflation are due this week, which will help finesse bets on timing of any rate cuts. Investors must also absorb a hefty slate of Treasuries auctions.

Read More: Fed Resets Clock on Cuts and Questions If Rates Are High Enough

The S&P 500 saw its worst week since March 2023 last week — extending a drawdown from its all-time high to more than 5%. After the gauge’s strongest start to a year since 2019, investors have been increasingly skeptical about how much further the market could go over the near term, even accounting for the continued strength in the economy.

More than half of the “Magnificent Seven” cohort of tech megacaps will report earnings this week — leaving investors wondering whether those firms are going to live up to the high expectations set for artificial intelligence.

Profits for the seven biggest growth companies in the S&P 500 — Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc., Nvidia, Meta Platforms Inc. and Tesla Inc. — are on course to surge 38% in the first quarter, according to Bloomberg Intelligence. When excluding them, the rest of the benchmark index’s profits are anticipated to shrink by 3.9%.

Meanwhile, the limited Israeli strike on Iran and the muted response from the Iranian leadership potentially provide an opportunity for the conflict between the long-term adversaries to scale back, for now, according to RBC Capital Markets.

“It is far from an easy truce and could be tested once again as the broader Middle East backdrop remains fraught, even if the worst outcome did not come to pass,” Helima Croft, head of global commodity strategy at RBC, wrote in a note to clients. “The last two weeks have shown that this war can take sudden escalatory turns and that opposing sides may lack a cogent understanding of the other’s red lines, thereby risking a fog of war dynamic.”

Oil fell after its first back-to-back weekly decline this year as traders weighed the potential next steps from Iran and Israel. Gold slipped.

Elsewhere this week, inflation readings in Australia and Malaysia are due. Bank Indonesia will give a policy decision just as the currency comes under pressure, while earnings at global growth bellwether Caterpillar are due.

Key events this week:

  • Eurozone consumer confidence, Monday

  • Philippines and US military forces commence annual war games near Taiwan and South China Sea, Monday

  • ECB President Christine Lagarde speaks, Monday

  • Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Tuesday

  • UK S&P Global, CIPS Manufacturing PMI, Tuesday

  • Australia CPI, Wednesday

  • Indonesia rate decision, Wednesday

  • IBM, Boeing, Meta Platforms earnings, Wednesday

  • Malaysia CPI, Thursday

  • South Korea GDP, Thursday

  • Turkey rate decision, Thursday

  • US GDP, wholesale inventories, initial jobless claims, Thursday

  • Microsoft, Alphabet, Airbus, Caterpillar earnings, Thursday

  • Japan rate decision, Tokyo CPI, inflation and GDP forecasts, Friday

  • US personal income and spending, University of Michigan consumer sentiment, Friday

  • Exxon Mobil, Chevron earnings, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.2%, ending a six-day losing streak as of 10:42 a.m. Tokyo time

  • Nikkei 225 futures (OSE) rose 0.5%

  • Japan’s Topix rose 1.2%, more than any closing gain since March 21

  • Australia’s S&P/ASX 200 rose 1%, more than any closing gain since March 28

  • Hong Kong’s Hang Seng rose 1.2%, more than any closing gain since April 10

  • The Shanghai Composite fell 0.2%

  • Euro Stoxx 50 futures rose 0.2%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0665

  • The Japanese yen was unchanged at 154.64 per dollar

  • The offshore yuan was little changed at 7.2550 per dollar

Cryptocurrencies

  • Bitcoin rose 0.2% to $64,814.31

  • Ether was little changed at $3,150.22

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 4.65%

  • Australia’s 10-year yield advanced seven basis points, more than any closing advance since April 11

Commodities

  • West Texas Intermediate crude fell 0.3% to $82.92 a barrel

  • Spot gold fell 0.6% to $2,376.56 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess, Michael G. Wilson, Richard Henderson and Tassia Sipahutar.

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