Moving markets today: Asian stocks slide mirroring Wall Street tech drop, oil prices rally on Middle East tensions; China’s Q1 GDP jumps 5.3 per cent, yen hits lowest level since 1990; All eyes on UK employment data and US Fed’s Powell speech.
US stocks experienced a sharp decline, initially boosted by strong retail sales but later pressured by increasing Treasury yields and concerns over geopolitical tensions between Iran and Israel. Asian markets followed suit, reacting to uncertainties surrounding potential changes in Federal Reserve interest rates. Oil prices surged due to escalating tensions in the Middle East following Israel’s vow to retaliate against Iran’s recent attack, despite calls for restraint from allies. Gold prices also rose, nearing record highs. China’s economy showed impressive growth in the first quarter, exceeding analysts’ expectations, but new home prices in March saw their most significant drop since August 2015. Property investment in China also declined in the first quarter. Additionally, the yen fell below ¥154 against the dollar for the first time since 1990. Looking ahead, investors will be closely monitoring the UK’s February employment report and earnings reports from UnitedHealth, Bank of America, and Johnson & Johnson. Here are five key takeaways for your day.
China’s Q1 GDP soars 5.3 per cent; but March new home prices plummet
China’s economy showed robust growth in the first quarter, expanding by 5.3 per cent compared to the same period last year, which exceeded expectations and provided a positive signal for policymakers. The quarter-on-quarter GDP growth of 1.6 per cent in January-March also surpassed forecasts, indicating a strong economic performance.
However, the property market in the world’s No. 2 economy continues to face challenges despite government efforts to stimulate demand. New home prices experienced their sharpest decline in over eight years in March, dropping by 2.2 per cent year-on-year and 0.3 per cent month-on-month. This highlights ongoing weaknesses in the housing market despite policy support measures.
Property investment in China declined by 9.5 per cent in the first quarter compared to the previous year, suggesting that the sector still has obstacles to overcome before seeing significant improvement. This decline follows a 9.0 per cent drop in the January-February period, indicating that a solid recovery in the property market may take more time.
Japanese yen plummets below ¥154 mark, hits lowest level since 1990
The Japanese yen experienced a significant drop, dipping below the ¥154 mark against the US dollar for the first time since 1990. This decline raised concerns among analysts who warned that it could trigger direct intervention from Japan.
The yen reached as low as ¥154.44 per dollar during Monday afternoon trading in New York as traders adjusted their expectations for potential interest rate cuts by the US Federal Reserve, particularly after strong retail sales data, the FT reported.
Japanese officials have been vocal in recent weeks about their readiness to intervene in currency markets to prevent excessive movements in the yen. Despite this, the yen saw a slight recovery to ¥154.17 per dollar during early Tuesday morning trading in Asia.
Israeli military pledges response to Iran attack amid mounting calls for restraint
Israelis were eagerly awaiting Prime Minister Benjamin Netanyahu’s response to Iran’s first-ever direct attack on their country. The international community was urging caution, fearing an escalation of tensions in the Middle East.
Netanyahu held a second meeting with his war cabinet in less than 24 hours to discuss how to react to Iran’s missile and drone attack over the weekend, according to a government source. Israel’s military Chief of Staff, Herzi Halevi, confirmed that Israel would retaliate but did not provide details.
US Secretary of State Antony Blinken urged Israel to avoid escalating the situation further as it considered its response to Iran’s recent drone and missile attacks.
What’s on the radar
We’re currently in the midst of earnings season, where many financial companies are unveiling their latest results. It’s crucial to keep an eye on big players like Bank of America, Blackstone, and American Express. All eyes are particularly on Netflix, to see if it can maintain the impressive growth it displayed at the end of last year.
Today, UnitedHealth, Bank of America, and Johnson & Johnson earnings results will also be in focus, adding to the anticipation surrounding this earnings season.
This week holds several significant events. On Tuesday, we anticipate the release of the UK employment report for February, followed by consumer and producer price data on Wednesday. Additionally, China will provide a flurry of activity indicators for March on Wednesday.
US Federal Reserve Chair Jerome Powell is also scheduled to deliver a speech on Tuesday. Meanwhile, finance ministers from around the world will gather for the International Monetary Fund’s Spring meetings from April 15 to 20 to discuss global economic trends and challenges.
This week also marks a significant moment for democracy, with various countries, notably India, starting their election processes. India’s 44-day parliamentary election begins on Friday, with expectations that Narendra Modi’s Bharatiya Janata Party will continue its leadership for another five years.
Wall Street tech slump rattles Asian markets; oil prices surge amid Middle East woes
The US stock market had a rough day as major indices like the S&P 500 and Nasdaq slipped by 1.2 per cent and 1.8 per cent respectively. Nearly all stocks took a hit, especially the tech giants, known as the “Magnificent Seven,” which all saw declines. Even smaller companies in the Russell 2000 were down by 1.4 per cent. The Dow Jones Industrial Average fell too, closing at 37,735.24, a drop of 0.66 per cent.
Investors were jittery, pushing up the Vix, a measure of stock market volatility, to its highest level since October 30. Their concern? Inflation persisting might throw a wrench into the Federal Reserve’s plans to lower interest rates this year.
Every sector within the S&P 500 felt the pinch, particularly real estate and utilities, which fell more than 1 per cent. Apple took a hit after reports showed a 10 per cent drop in smartphone shipments in the first quarter of 2024. Tesla also stumbled, announcing layoffs of over 10 per cent of its global workforce.
However, not all news was bad. Goldman Sachs saw its shares rise by more than 3 per cent after reporting profits that exceeded Wall Street expectations, driven by strong performance in underwriting, deals, and bond trading in the first quarter.
Over in Asia, markets were down, and the dollar continued its climb to five-month highs. Japan’s Nikkei N225 was down by 1.6 per cent, with other Asian benchmarks following suit. Stock futures for Hong Kong also slid. Meanwhile, US share contracts in Asia mirrored the earlier dip of the S&P 500, falling by over 1 per cent.
The dollar’s winning streak extended for the fifth day against six major currencies, while gold surged by 1.7 per cent to $2,383.19, possibly setting a new closing record.
In commodities, both US and Brent crude saw gains, driven by rising tensions in the Middle East. Spot gold also inched up by 0.1 per cent to $2,385.88 per ounce.