Asian stocks rally as tech earnings power gains: Markets wrap

Equities in Asia rose Thursday after Wall Street resumed a rally as robust earnings helped overcome worries about persistent inflation.

Shares in Australia, Japan and Hong Kong advanced, while those in South Korea fluctuated. Taiwan stocks reached an intraday record high in their first trading day since Feb. 5, boosted by a 9.8% gain by Taiwan Semiconductor Manufacturing Co.

Japan’s blue-chip equity gauge is at a three-year high relative to its broader counterpart as major exporters such as technology firms rally on strong earnings and a weak yen. The so-called NT ratio, which compares the Nikkei 225 Stock Average with the Topix, reached its highest since 2021. The Nikkei is within a few percentage points of its 1989 record.

“Asian markets are taking a cue from the US markets that continue to price very aggressively soft-landing outcome for the economy and positive earnings growth in 2024,” said Homin Lee, senior macro strategist at Lombard Odier.

A Japanese official said the country is at the last stage of beating deflation, ahead of the release of economic growth figures Thursday that showed a surprise slip into recession. The yen was little changed near 150 per dollar, after touching a three-month low this week.

US futures were little changed in Asia after the S&P 500 rose 1% Wednesday to retake the 5,000 mark. The gains retraced the bulk of losses Tuesday when US core inflation for January rose more than expected, muddying the path ahead for Federal Reserve rate cuts, as investors continued to parse the data.

“We are not changing our call for risk-on factors and cyclicals to outperform over the course of 2024,” 22V Research strategists led by Dennis DeBusschere wrote in a note Wednesday. “Over time we think it will become clear that January was more one-off vs a new CPI trend.”

Treasuries were little changed after a Wednesday rally that wiped six basis points from the 10-year yield. Australia and New Zealand yields fell Thursday. An index of the dollar was slightly weaker.

TSMC’s advance sent it to a record high. Morgan Stanley lifted its target price for the company by 9%, anticipating the chip giant will post more “meaningful” revenue from artificial-intelligence chips this year.

“The migration to bigger large language models will boost demand for higher-end chips, which benefits TSMC’s leading-edge foundry business,” analysts including Charlie Chan wrote in a note.

Gains for US stocks on Wednesday were helped by large tech companies. The NYSE Fang+ index that includes Nvidia Corp, Microsoft Corp and Apple Inc rose 2% — twice as much as the broader market. Favorable earnings reports also helped. Uber surged 15% after announcing $7 billion in share buybacks, while Robinhood Markets Inc. rose 14% as revenue topped estimates.

Australian hiring edged up at the start of the year, while unemployment climbed to a two-year high, highlighting the nation’s cooling labor market and prompting bets on an earlier interest-rate cut. The Aussie dollar erased gains after the data and was little-changed versus the greenback.

Mainland Chinese markets remain closed Thursday for the Lunar New Year holiday. The Golden Dragon index of US-listed Chinese companies climbed 3.5% in New York trading, in a sign of upward pressure for those stocks.

Traders have further scaled back Fed cut bets, and have largely given up hope of a cut in March. The chance of one the following meeting in early May stands at 1-in-3, down from almost full certainty two weeks ago.

“The ‘hot’ inflation data do not change our base case for a soft landing,” said Solita Marcelli at UBS Global Wealth Management. “But we are continuing to monitor the incoming data and the start of rate cuts could be delayed should the economic prints remain strong.”

Federal Reserve Bank of Chicago President Austan Goolsbee said Wednesday that slightly higher inflation data for a few months would still be consistent with a path back to the central bank’s 2% goal. Fed Vice Chair for Supervision Michael Barr, meanwhile, said US policymakers need to see more data showing inflation is heading back to target levels before they start cutting rates.

In Asia, data set for release includes January trade figures for India, and a monetary policy decision in the Philippines. In Indonesia, meanwhile, Defense Minister Prabowo Subianto declared victory in Wednesday’s presidential vote.

Data due Thursday in the US includes US Empire Manufacturing, initial jobless claims, industrial production, retail sales and business inventories.

Elsewhere, BHP Group said it will have an impairment charge of $2.5 billion in its half-yearly results to be announced next week relating to nickel assets.

Oil dropped Wednesday after the US reported crude inventories rose to levels last seen in November. Gold was little changed at $1,992 per ounce. Bitcoin topped $52,000, and is trading at levels not seen since December 2021.

Key Events This Week:

• US Empire manufacturing, initial jobless claims, industrial production, retail sales, business inventories, Thursday
• ECB President Christine Lagarde speaks, Thursday
• Atlanta Fed President Raphael Bostic speaks, Thursday
• Fed Governor Christopher Waller speaks, Thursday
• ECB chief economist Philip Lane speaks, Thursday
• US housing starts, PPI, University of Michigan consumer sentiment, Friday
• San Francisco Fed President Mary Daly speaks, Friday
• Fed Vice Chair for Supervision Michael Barr speaks, Friday
• ECB executive board member Isabel Schnabel speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 12:48 p.m. Tokyo time
• Nikkei 225 futures (OSE) rose 0.8%
• Japan’s Topix rose 0.1%
• Australia’s S&P/ASX 200 rose 0.7%
• Hong Kong’s Hang Seng rose 0.6%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0725
• The Japanese yen rose 0.2% to 150.27 per dollar
• The offshore yuan was little changed at 7.2250 per dollar

Cryptocurrencies

• Bitcoin rose 1.2% to $52 393.06
• Ether rose 0.7% to $2,800.96

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.23%
• Japan’s 10-year yield declined 3.5 basis points to 0.715%
• Australia’s 10-year yield declined 12 basis points to 4.15%

Commodities

• West Texas Intermediate crude fell 0.6% to $76.21 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.