| 14 April 2024, Sunday |

Asia stocks hit seven-month low as China skids, funds favour Wall Street

On Monday, Asian stocks fell to seven-month lows as regulatory concerns threw Chinese stocks into disarray and good U.S. corporate profits pulled money out of emerging markets and into Wall Street.

Blue chips from China.

The CSI300 index fell 2.4 percent to its lowest level in ten weeks, as the education and property sectors were dragged down by concerns about stricter government regulations. (Read the rest of the story)

This dragged MSCI’s broadest Asia-Pacific stock index outside of Japan.

MIAPJ0000PUS is down 1.4 percent and hasn’t been this low since early January. The Nikkei.N225 in Japan rose 1.4 percent, but only from a seven-month low.

Nasdaq futures NQc1 remained stable at historic highs, while S&P 500 futures ESc1 fell 0.3 percent. Both the EUROSTOXX 50 futures STXEc1 and the FTSE futures FFIc1 fell 0.5 percent.

Facebook Inc FB.O, Tesla Inc TSLA.O, Apple Inc AAPL.O, Alphabet Inc GOOGL.O, Microsoft Corp MSFT.O, and AMZN.O are among the S&P 500 businesses due to release quarterly results this week.

With little over half of the S&P 500 having reported, 88 percent of companies have outperformed analyst estimates. This is one of the main reasons why, in the first half of 2021, global money managers invested more than $900 billion in US funds.

According to Oliver Jones, a senior markets economist at Capital Economics, profits in the United States are expected to be around 50% higher in 2023 than they were the year before the pandemic, much higher than most other major nations.

“With so much optimism baked in,” he added, “it is likely to us that the tailwind of growing profit projections, which has provided so much support to the stock market over the past year, will fade.”

The week also includes a slew of US data that should highlight the economy’s strong performance. The second-quarter gross domestic product is expected to grow by 8.6% on an annualized basis, while the Fed’s preferred gauge of core inflation is expected to rise by 3.7 percent in June.

The Federal Reserve meets on Tuesday and Wednesday and, while no change in policy is expected, Chair Jerome Powell will likely be pressed to clarify what “substantial further progress” on employment would look like.

“The main message from Fed Chair Powell’s post-meeting press conference should be consistent with his testimony before Congress in mid-July when he signalled no rush for tapering,” said NatWest Markets economist Kevin Cummins.

“However, he will clearly remind market participants that the taper countdown has officially begun.”

So far, the bond market has been remarkably untroubled by the prospect of eventual tapering with yields on U.S. 10-year notes US10YT=TWEB having fallen for four weeks in a row to stand at 1.26%.

The drop has done little to undermine the dollar, in part because European yields have fallen even further amid expectations of continued massive bond buying by the European Central Bank.

The single currency has been trending lower since June and touched a four-month trough of $1.1750 last week. It was last at $1.1775 EUR= and looked at risk of testing its 2021 low of $1.1702.

The dollar has also been edging up on the yen to reach 110.40 JPY=, but remains short of its recent peak at 111.62. The fall in the euro has lifted the dollar index =USD to 92.870, a long way from its May trough of 89.533.

The rise in the dollar has offset the drop in bond yields to leave gold range-bound around $1,800 an ounce XAU=.

Oil prices have generally fared better amid wagers that demand will remain strong as the global economy gradually opens and supply stays tight. O/R

Brent LCOc1 was trading down 22 cents at $73.88 a barrel, while U.S. crude CLc1 fell 28 cents to $71.79.

  • Reuters