Asian stocks quiet, yen surges on Wednesday

Asian stocks were quiet on Wednesday following disappointing earnings from US tech giants Tesla and Alphabet, which dampened investor sentiment.

The yen reached a six-week high in anticipation of a central bank meeting next week where a potential rate hike is still being considered.

The broad MSCI Asia-Pacific index outside Japan (excluding Japan) dipped 0.08 per cent to 566.26, hovering near its one-month low. Japan’s Nikkei also edged down 0.23 per cent, while Taiwanese markets remained closed due to a typhoon.

Nasdaq futures dropped by 0.5 per cent and S&P 500 futures decreased by 0.36 per cent following Tesla’s announcement of its lowest profit margin in over five years.

Alphabet’s shares declined in after-hours trading despite beating revenue and profit expectations.

Kyle Rodda, a senior financial market analyst at Capital.com, noted that the high expectations for Alphabet resulted in the stock not moving higher even after slight earnings beat. The market lacked new catalysts for buying into the stock.

Chinese stocks mirrored this trend, as the Shanghai Composite and CSI300 indexes dipping 0.18 per cent and 0.19 per cent respectively. Despite government stimulus efforts, investor confidence in the world’s second-largest economy remains fragile.

Investors are focused on upcoming US economic data releases that may impact Federal Reserve policy decisions. They are eagerly anticipating Thursday’s GDP data and Friday’s PCE data, which is the Fed’s preferred inflation measure.

This data will play a key role in assessing the possibility of Fed interest rate cuts in the coming year.

Markets are currently expecting around 62 basis points of easing in 2024, with a near certainty (95 per cent) of a cut in September, according to the CME FedWatch tool.

However, a growing number of economists anticipate a more cautious approach from the Fed, potentially with only two rate cuts this year (September and December) as resilient US consumer demand offsets softening inflation.

Meanwhile, the Japanese yen emerged as the star performer, surging to a six-week high of 155.25 against the US dollar.

This comes after a nearly one per cent jump on Tuesday and a significant recovery from its near 38-year low of 161.96 at the beginning of July.

Speculation surrounds potential intervention by the Bank of Japan (BOJ) to weaken the US dollar and support the yen. Estimates suggest the BOJ may have spent around six trillion yen ($38.62 billion) in such interventions.

Oil prices increased as US crude inventories fell. Brent crude futures for September rose by 0.25 per cent to $81.21 a barrel, while US West Texas Intermediate crude for September gained 0.26 per cent to $77.16 per barrel.

Attribution: Reuters