Written by Uncle Banerjee
SINGAPORE (Reuters) – Asian stocks rose on Wednesday as shares in electric vehicle (EV) maker Tesla soared in after-hours following the announcement of a new model and strong results from some U.S. companies boosted risk sentiment. It rose following Wall Street.
The yen is entrenched near 34-year lows and traders remain wary of possible intervention by the Japanese government.
MSCI's broadest index of Asia-Pacific stocks outside Japan rose 1% on Tuesday to 1.55% as stocks recovered from last week's plunge. Japan's Nikkei Stock Average rose 2%.
Chinese stocks were mixed, with blue chip indexes flat, but Hong Kong's Hang Seng index rose 1.6%.
Tesla kicked off earnings season for the U.S. tech giant, announcing the launch of a new electric vehicle model and sending shares up 12% in after-hours trading.
U.S. stocks closed higher on Tuesday after companies such as automaker General Motors reported strong financial results. S&P 500 E-mini futures rose 0.27%. [.N]
An earnings-packed week, including results from tech giants Metaplatforms, Alphabet and Microsoft, will set the tone for the near term.
Anderson Alves, a trader at ActivTrades, said: “We are also looking forward to the upcoming earnings results of major US tech companies like Meta, which could keep the tech sector's positive tone ahead of these announcements. “There is,” he said.
Beyond corporate earnings, traders are also looking at U.S. gross domestic product (GDP) data and March consumer spending data, the Fed's preferred measure of inflation, to be released later this week to gauge trends in U.S. interest rates. I'm paying attention.
Markets are currently pricing in the Federal Reserve's first interest rate cut in September, with the Fed expected to cut interest rates by 43 basis points this year. At the beginning of the year, traders were pricing in 150 basis points of easing for the year.
The dramatic shift has pushed U.S. Treasury yields higher and strengthened the dollar over the past few weeks, but on Wednesday it was also reported that weak demand had cooled U.S. business activity to a four-month low in April. Inflation fell slightly on Wednesday, but was subdued on Wednesday. Due to the sharp rise in input prices.
“The surprisingly soft PMI numbers suggest the U.S. economy will lose momentum in the second quarter,” said Tony Sycamore, market strategist at IG.
The yield on the 10-year Treasury note was 4.613% on Wednesday, but fell to 4.568% on Tuesday following economic data.
The dollar index, which measures the value of the U.S. currency against the country's six currencies, fell 0.066% to 105.60, after falling 0.424% on Tuesday. [FRX/]
Intervention zone circle
The Japanese yen was trading at 154.79 yen to the dollar, not far from Tuesday's 34-year low of 154.88 yen, ahead of the two-day Bank of Japan policy meeting that ends on Friday.
The dollar/yen pair, which is highly sensitive to U.S. yields, has been moving in a very narrow range, with traders wary that anything above 155 yen could increase the risk of Japanese authorities intervening to sell the dollar.
Japan's Finance Minister Shunichi Suzuki on Tuesday issued his strongest warning yet about possible intervention, saying his meetings with his U.S. and South Korean counterparts last week laid the foundation for Japan to act against excessive yen movements. said.
The United States, Japan and South Korea agreed last week to “consult closely” on foreign exchange markets in their first trilateral fiscal dialogue, acknowledging Tokyo and South Korea's concerns over the recent plunge in their currencies.
Japan last intervened in foreign exchange markets in 2022, first in September and second time to support the yen.
IG's Sycamore said if U.S. core PCE inflation is higher than expected, “the market will quickly take advantage of the supportive backdrop for yields and push the pair towards 156.00.”
On the day, US crude oil fell 0.1% to $83.28 per barrel, and Brent crude oil fell 0.12% to $88.31. Oil prices rose on Tuesday as investors' focus shifted away from tensions in the Middle East. [O/R]
Spot gold fell 0.2% to $2,317.39 an ounce. [GOL/]
(Reporting by Ankur Banerjee; Editing by Muralikumar Anantharaman)
