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Asian Stocks Expected to Open Flat on Technology Earnings Disappointment
Asian stocks are projected to open flat to lower following a tepid performance by major technology companies. Futures indicate potential declines in Japanese and Hong Kong shares, while Australian equities are set for a minimal change. Trading in Taipei will be suspended due to an impending typhoon.
Effects of Underwhelming Tech Earnings
Investor enthusiasm was dampened as earnings reports from Alphabet Inc. and Tesla Inc. fell short of expectations. Alphabet posted revenue that exceeded forecasts, but the company's chief emphasized a need for patience regarding AI investments, leading to a retreat in its stock. Tesla's shares plummeted by as much as 7% after a profit miss and a delay in its Robotaxi event. The Nasdaq 100 and S&P 500 both fell in regular trading, impacting the $290 billion ETF tracking the Nasdaq 100.
High profit expectations for these leading tech companies were not met, raising concerns that their outlooks will face intense scrutiny given their elevated valuations.
Market Reactions Across Asia
In Taiwan, financial markets will be closed due to Typhoon Gaemi, which is approaching with strong winds and heavy rain. The cessation affects the island's $2.4 trillion stock market. Meanwhile, China's economic and geopolitical challenges have resulted in a significant drop of 2.1% in the CSI 300 Index, marking its largest decline in six months. Japan is experiencing political frustration over the central bank’s cautious policy, keeping rates extremely low while inflation outpaces targets. Calls are growing for the Bank of Japan to consider normalizing monetary policies.
US Market and Corporate Highlights
Markets in the US face heightened volatility, influenced by the presidential election and a traditionally weak seasonal period. United Parcel Service Inc. experienced its worst drop ever following a profit miss. Major US tech firms are navigating difficult profit comparisons from stellar earnings cycles of the previous year. However, Barclays strategists argue that big tech remains attractive due to robust profit expectations, despite recent market turbulence.
In bond markets, US two-year yields fell post a strong $69 billion auction, underscoring market bets on rate cuts. Oil prices declined due to algorithmic selling and low summer liquidity. Investors are also assessing the impact of President Joe Biden halting his re-election bid, with analysts advising diversification over tactical bets amid uncertain policy changes.
Corporate Earnings and Economic Data
In corporate earnings, Visa Inc. reported quarterly revenue below estimates, Coca-Cola Co. raised its full-year outlook, General Motors Co. surpassed expectations with a 60% profit surge, and LVMH experienced slowed sales growth. Key economic events this week include the Canada rate decision, US new home sales, S&P Global PMI, IBM and Deutsche Bank earnings, Germany IFO business climate, US GDP, initial jobless claims, durable goods, and US personal income data.
Market Moves
The S&P 500 fell by 0.2%, futures dropped 0.4%, Nasdaq 100 fell by 0.3%, and the Dow Jones Industrial Average decreased by 0.1%. The MSCI World Index remained unchanged while the Russell 2000 Index rose by 1%. In currencies, the Bloomberg Dollar Spot Index and the offshore yuan remained steady, while the British pound and euro saw minimal changes.
Cryptocurrency and Commodities
In the cryptocurrency market, Bitcoin saw a slight increase of 0.1%, and Ether remained unchanged. For commodities, West Texas Intermediate crude rose by 0.6% to $77.43 per barrel, and spot gold showed little change.
Overall, investors are cautiously navigating a landscape of mixed earnings and economic data, alongside geopolitical and policy uncertainties.
