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Asian stocks languish at open as US rally falters
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Equities in Japan fell while those in South Korea and Australia climbed. Futures for Hong Kong pointed to a flat open. Contracts for US stocks were little changed. The S&P 500 briefly hit 5,200 before paring its advance at the close.
Stocks in Asia struggled for direction following a sluggish US session, with investors split on whether the market can sustain this month’s rally given economic crosscurrents.
Equities in Japan fell while those in South Korea and Australia climbed. Futures for Hong Kong pointed to a flat open. Contracts for US stocks were little changed. The S&P 500 briefly hit 5,200 before paring its advance at the close.
Treasury 10-year yields were steady after falling on solid demand in a sale of three-year notes. The Bloomberg dollar index held on to gains recorded Tuesday. The yen inched lower, as US calls for caution on intervention added to expectations that the currency will face continued pressure. Japanese Finance Minister Shunichi Suzuki said the government stands ready to take all possible measures as needed.
In Asia, the focus will be on President Xi Jinping’s trip to Europe and how trade relations will develop from here. In another sign of geopolitical tensions between China and the West, the US has revoked licenses allowing Huawei Technologies Co. to buy semiconductors from Qualcomm Inc. and Intel Corp., according to people familiar with the matter.
Stocks across the world have been trying to make a comeback after April’s rout, with gains fueled by prospects of Federal Reserve rate cuts and solid earnings.
“We continue to see a path higher for stock prices as long as fundamental conditions remain stable and profit growth remains on a positive trend,” said Anthony Saglimbene at Ameriprise. “Elevated interest rates and sticky inflation, along with the Fed holding monetary policy at restrictive levels for longer than most expected at the start of the year, introduce some added risks.”
Despite resilient consumption and artificial-intelligence optimism, US economic growth slid last quarter while inflation stayed high. Fed Bank of Minneapolis President Neel Kashkari said Tuesday it’s likely the central bank will keep rates where they are “for an extended period of time” until officials are certain prices are on track to their target.
In commodities, oil was little changed as traders tracked tensions in the Middle East and a mildly bearish US stockpiles report.
US growth momentum is resilient, but likely slowing, and that could weigh on equities, which have decoupled from the Fed by assuming that an acceleration in growth was lying ahead, a JPMorgan team led by Mislav Matejka wrote.
The biggest buyers of US equities, American companies, are back in the market and ready to drive the next leg of the stock rally, according to Goldman. About a sixth of the $934 billion in estimated share repurchases this year are expected get executed in May and June, the firm’s tactical specialist Scott Rubner wrote.
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