By Vivek Kumar
Moving markets today: Asian stocks rise with Wall Street, Japan’s yen holds firm, oil slips amid Israel-Gaza ceasefire talks, China’s factory activity growth slows; Focus shifts to US Fed policy decision, Amazon.com, and Coca-Cola earnings results
Stocks in the US closed higher on Monday, with Tesla and Apple leading the charge with significant gains. This positive momentum extended to Asian markets, which mirrored the upward trend seen on Wall Street. Tesla’s stock surged by 15.3 per cent following progress in obtaining regulatory approval for its advanced driver-assistance program in China, while Apple saw a 2.5 per cent increase after reports of discussions with OpenAI regarding AI technology. Oil prices slightly declined as ceasefire talks between Israel and Hamas alleviated concerns of heightened conflict in the Middle East. Gold prices also fell ahead of the Federal Reserve’s monetary policy decision. The Japanese yen strengthened against the US dollar, suspected to be influenced by intervention. In China, factory activity expanded for the second consecutive month in April. Market attention is now focused on the start of the Fed’s two-day policy meeting and the release of non-farm payroll data later in the week. The Fed is expected to maintain its benchmark interest rate, while investors are also awaiting preliminary euro area consumer price data for April and earnings reports from Amazon.com and Coca-Cola for the first quarter. Here are five key takeaways for your day.
China’s factory and services growth slows down in April
Official surveys released on Tuesday revealed that China’s manufacturing and services sectors experienced slower growth in April. This suggests a potential loss of momentum for the world’s second-largest economy as it enters the second quarter.
The official manufacturing Purchasing Managers’ Index (PMI) for April, reported by the National Bureau of Statistics, registered at 50.4. While it slightly exceeded analysts’ expectations of 50.3 according to a Bloomberg poll, it was lower than the March figure of 50.8, indicating a somewhat less robust level of activity. A PMI reading above 50 indicates expansion compared to the previous month.
In April, the services component of the NBS non-manufacturing survey showed the least amount of growth since January, with a reading of 50.3, down from 52.4 in March.
Yen holds firm after suspected intervention spurs sharp gains
The yen held steady against the dollar on Tuesday after a sharp rise the day before, suspected to be driven by Japanese authorities’ intervention. Although the yen dipped slightly by 0.30 per cent, trading at 156.78 per dollar, it bounced back from a 34-year low of 160.245 on Monday. Traders believe Tokyo’s intervention prompted a significant rebound.
While Japanese officials haven’t confirmed the intervention, the market remains vigilant, especially with the Federal Reserve’s upcoming monetary policy review. Masato Kanda, Japan’s top currency diplomat, stated that authorities were ready to address foreign exchange matters round the clock but refrained from confirming any intervention by the finance ministry.
UK non-food shop prices decline in April: BRC
In the UK, supermarket prices for non-food items have seen a year-on-year decrease for the first time since 2021, bringing overall shop inflation below 1 per cent. This news comes as a relief for consumers grappling with rising living expenses, the FT reported.
According to recent industry data released by the British Retail Consortium, annual shop price inflation has eased to 0.8 per cent this month from 1.3 per cent in March, marking the lowest rate since December 2021. Specifically, prices for non-food items have entered into deflation, dropping by minus 0.6 per cent in April. Retailers offering promotions have contributed to this decline. This shift contrasts with a 0.2 per cent increase in March, which was the lowest rate since October 2021 and the first negative reading since December 2021.
What’s coming up
All eyes in the financial world are on the imminent decision by the US Federal Reserve regarding interest rates, set to be announced later today. However, the general expectation is that the Fed will likely stick to its current course, given that inflation isn’t dropping as quickly as previously predicted. Some economists are now suggesting a potential rate cut later in the year, possibly after the US presidential election in November.
The spotlight will be on insights shared during Fed Chair Jay Powell’s post-meeting press conference.
Alongside this, a wealth of economic data is on the horizon. This includes fresh employment figures from the US on Friday and international comparisons of manufacturing purchasing managers’ index (PMI) figures. There might be some variations due to public holidays in several countries on Wednesday. Japan is anticipated to provide updates on industrial production and employment, while the EU will unveil preliminary GDP estimates for the entire trading bloc and major economies like France and Germany.
Moreover, attention will be on corporate earnings reports, with significant announcements expected from companies such as Amazon.com, Apple, Coca-Cola, Qualcomm, and Mastercard. Additionally, annual meetings, notably that of Anglo American, a takeover target, are scheduled for Tuesday.
In the UK, the focus will shift to the local and mayoral elections in England and Wales on Thursday. These elections will decide the leadership of London and the two largest cities in the country, Birmingham and Manchester.
Asian stock markets mirror US gains, Japan takes the lead
Overnight, the US stock market saw gains across various indices. The Dow Jones Industrial Average increased by 0.38 per cent to close at 38,386.09, while the S&P 500 rose by 0.32 per cent to reach 5,116.17, and the Nasdaq Composite gained 0.35 per cent to settle at 15,983.08. The Russell 2000 index, which focuses on smaller companies, also experienced growth, climbing by 0.7 per cent.
Among the sectors within the S&P 500, nine out of eleven ended higher, with notable gains in consumer discretionary, utilities, real estate, materials, and industrials, while communication services and financials were the only sectors to see declines.
Tesla shares surged by an impressive 15.3 per cent after making progress in securing regulatory approval for its advanced driver-assistance program in China, its second-largest market after the US Apple also performed well, gaining 2.5 per cent following reports of renewed discussions with OpenAI regarding the use of the startup’s generative artificial intelligence (AI) technology.
However, other mega-cap stocks like Alphabet, Meta Platforms, and Microsoft finished lower, although Nvidia managed to close higher after paring early losses.
In Asian markets, Japan’s Nikkei N225 rose by 1.45 per cent as trading resumed after a holiday, while China’s markets showed mixed performance, with the CSI300 index up by 0.05 per cent and Hong Kong’s Hang Seng index rising by 0.5 per cent.
In the commodities market, oil prices edged down following ceasefire talks between Israel and Hamas in Cairo, alleviating fears of an expanded conflict in the Middle East. US crude fell by 0.16 per cent to $82.51 per barrel, while Brent was down by 0.05 per cent to $88.36. Additionally, spot gold fell by 0.22 per cent to $2,329.37 per ounce.
