Moving markets today: Asian stocks slide on tech decline; bitcoin falls 4%, Chinese home prices drop; PBOC holds key rates, focus shifts to U.S. data
Stock markets experienced mixed results, with Wall Street closing lower due to unexpected strength in producer prices, which offset an early rally. The S&P 500 ended down by 0.3 per cent. Asian stocks followed suit, declining notably, largely influenced by the tech sector’s struggles on Wall Street. Notably, Foxconn shares surged by as much as 9 per cent, contrasting with Adobe shares, which tumbled 10 per cent in after-hours trading due to a disappointing revenue outlook. In China, the property market continued to weaken, with home prices falling as the slump deepened, while the central bank maintained its key policy rate. Looking ahead, investors are awaiting US Industrial Production and preliminary Michigan Consumer Sentiment data to be released on Friday, which will likely impact market sentiment. Here are five key takeaways for your day.
Chinese home prices drop; central bank keeps key rates unchanged
House prices in major Chinese cities, for both new and pre-owned homes, dropped in February, indicating a continued downturn in the property market. The National Bureau of Statistics reported a 1 per cent decrease in average prices for new homes in top-tier cities compared to the previous year, with a steeper decline of 6.3 per cent for pre-owned homes.
Meanwhile, on Friday, China’s central bank decided to maintain a key policy rate unchanged while withdrawing funds from a medium-term policy loan operation. This decision aims to ensure currency stability amid uncertainties about potential Federal Reserve interest rate changes. The People’s Bank of China (PBOC) kept the rate for one-year medium-term lending facility (MLF) loans at 2.50 per cent, with a net withdrawal of 94 billion yuan from the banking system. This marks the first withdrawal of cash through this liquidity instrument since November 2022.
Japan unions will unveil results of wage talks, presaging shift at central bank
Japan’s largest trade union coalition will announce the results of this week’s wage talks on Friday, with expectations for a significant increase of over 4 per cent. This surge, if realized, would be the largest since the early 1990s, potentially impacting the Bank of Japan’s policies. The Rengo union group is expected to reveal the outcomes around 0715 GMT on Friday, following Toyota Motor’s announcement of its biggest pay raise in 25 years. Economists have revised their projections to 4 per cent or higher, compared to the initial estimate of around 3.9 per cent. Rengo represents approximately 7 million workers, mainly from large companies, Reuters reported.
Rise and shine: key changes while you were asleep
Foxconn’s stock prices surged by as much as 9 per cent on Friday morning after the company announced better-than-expected profits for the year 2023. Known as Hon Hai Precision Industry, the company reported fourth-quarter net profits of NT$53.1 billion, a 23 per cent increase from the previous three months. Despite a flat full-year net profit of NT$142 billion compared to the previous year, it surpassed Bloomberg’s analyst estimates by 7 per cent.
On the other hand, Adobe saw its shares plummet by 10 per cent in after-hours trading due to a softer revenue forecast, despite the overall excitement surrounding companies incorporating artificial intelligence technology into their products. The company, famous for software like Photoshop and Illustrator, anticipates second-quarter revenue of $5.25 billion to $5.30 billion, slightly below analysts’ forecasts.
Meanwhile, Nvidia experienced a 3.2 per cent decline in its shares, while a semiconductor index dropped by 1.8 per cent. The index has fallen by 3.5 per cent for the week as investors decided to capitalize on profits following recent substantial gains.
What’s coming up
Looking forward, the US is set to unveil its Industrial Production figures and the preliminary Michigan Consumer Sentiment data on Friday. These releases will serve as important indicators for traders as they prepare for the upcoming Federal Open Market Committee (FOMC) monetary policy meeting. The consensus among analysts is that the Fed will likely keep interest rates unchanged during this meeting. Market sentiment has shifted, with the probability of a rate cut of at least 25 basis points in June now standing at 62.9 per cent, down from 81.7 per cent recorded a week ago, according to CME’s FedWatch Tool.
Asian stock market hit by tech slide; bitcoin tumbles 4 per cent
The Dow Jones Industrial Average took a dip by 0.35 per cent to close at 38,905.66, while the S&P 500 and the Nasdaq Composite also saw declines of 0.29 per cent and 0.3 per cent respectively. The tech sector’s struggles contributed to a broader decline in Asian stocks, with significant drops in indices like Hong Kong’s Hang Seng and South Korea’s Kospi. This was further exacerbated by the decision of the central bank to keep the medium-term lending facility rate unchanged, leading to a decrease in Mainland Chinese blue chips CSI300 and a slight easing in Japan’s Nikkei 225.
In the financial markets, the 10-year Treasury yield remained at around 4.28 per cent, holding onto recent gains. The dollar index saw a modest increase, continuing its upward trend from the previous day. Meanwhile, Bitcoin experienced a notable decline of 4.51 per cent in value.
On the commodities front, oil prices witnessed a pullback due to profit-taking following a period of strong gains driven by various factors such as reductions in U.S. crude inventories and geopolitical tensions. Brent crude oil futures for May dropped by 0.3 per cent to $85.20 per barrel, while U.S. West Texas Intermediate (WTI) crude for April fell by a similar margin to $81.06.