(Bloomberg) — Most Asian stocks fell following losses on Wall Street following an unimpressive start to earnings reports from the “Magnificent Seven” mega-capitalized technology companies.
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Stock benchmarks in Japan, Hong Kong and mainland China fell, while those in South Korea swung between gains and losses. U.S. stocks fell on Tuesday, as traders assessed earnings from some of corporate America’s biggest companies, including Tesla Inc. and Alphabet Inc. The Taipei stock exchange is closed due to a typhoon, with tech giant Taiwan Semiconductor Manufacturing Co.
Investors were turning to technology sector profits to sustain a rally that has sent U.S. and global stocks to record highs. This did not materialize because Alphabet backed down, as the head of the company signaled that patience will be needed to see concrete results from investments in artificial intelligence. Tesla fell as much as 7% after profit missed estimates and the electric vehicle giant postponed its Robotaxi event until October. Most shares of Tesla suppliers and electric vehicle peers in Asia fell.
“Given that profit expectations are high for the ‘Magnificent Seven,’ these companies will have a lot to prove,” said Ameriprise’s Anthony Saglimbene. “At the same time, its prospects will likely be heavily scrutinized compared to lofty valuations.”
The yen strengthened for a third day, approaching the 155 per dollar level, as investors awaited a Bank of Japan policy meeting next week. Only about 30% of BOJ watchers predict authorities will raise interest rates on July 31, but more than 90% say there is a risk of such a move, according to a Bloomberg survey.
Any intraday dollar-yen rises are being sold by smaller Tokyo-based accounts as the narrative around a possible 15 basis point rate hike by the BOJ gains traction, according to a currency trader based in Asia.
Bloomberg’s dollar index hit its highest level in nearly two weeks before erasing gains.
Investors are also paying attention to China, where the market has lost strength due to economic problems and geopolitical risks. The outstanding balance of short trades on China’s stock exchanges fell to 27.9 billion yuan ($3.8 billion), the lowest in more than four years, on Monday, as China’s new measures to curb short selling came into effect, the China Securities Journal reported on Wednesday.
The number of redemptions from China’s equity-focused mutual funds was one of the highest since 2005 in the second quarter, with more than half of the best-performing products seeing net sales by existing investors, according to Changjiang Securities.
Typhoon Gaemi is approaching Taiwan with strong winds and heavy rain, forcing Taipei to suspend its $2.4 billion stock market. Trading in bonds, currencies and fixed income will be suspended on Wednesday, according to a statement from its exchange. The Philippines will also close its financial markets, schools and offices after the typhoon hits Manila.
Upbeat earnings on Wall Street would be a much-needed boost for stocks after an excellent first half. The market faces pressure heading into a seasonally weak period, with volatility likely to be exacerbated by the US presidential election. Adding to the problems for Big Tech, United Parcel Service Inc. suffered its worst crash ever due to lost profits.
The five biggest U.S. technology companies face tough comparisons to last year’s stellar earnings cycles. The group’s profits are expected to rise 29% in the second quarter from the same period a year ago, data compiled by Bloomberg Intelligence show.
10-year Treasury futures fell in Asia as investors awaited Wednesday’s debt auctions and U.S. manufacturing PMI data. Oil fell amid algorithmic selling and low liquidity over the summer. Gold maintained an advance ahead of key US economic data this week, which should support the case for interest rate cuts.
Main events this week:
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Canada Rate Decision Wednesday
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US new home sales, S&P Global PMI, Wednesday
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IBM and Deutsche Bank Earnings Wednesday
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IFO business climate in Germany, Thursday
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US GDP, initial unemployment claims, durable goods, Thursday
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US Personal Income, PCE, Consumer Sentiment, Friday
Some of the main movements in the markets:
Actions
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S&P 500 futures were down 0.4% at 12 p.m. Tokyo time
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Nikkei 225 futures fell 0.4%
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Japan’s Topix fell 0.4%
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Australia’s S&P/ASX 200 was little changed
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Hong Kong’s Hang Seng fell 0.7%
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The Shanghai Composite fell 0.3%
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Euro Stoxx 50 futures fell 0.5%
Coins
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The Bloomberg Dollar Spot index was little changed
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The euro fell 0.1% to $1.0843
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The Japanese yen rose 0.2% to 155.26 per dollar
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The offshore yuan was little changed at 7.2879 per dollar
Cryptocurrencies
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Bitcoin little changed at $65,883.76
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Ether fell 1% to $3,449.51
Titles
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The 10-year Treasury yield was little changed at 4.25%
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Japan’s 10-year yield rose one basis point to 1.070%
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Australia’s 10-year yield rose two basis points to 4.36%
goods
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West Texas Intermediate crude rose 0.5% to $77.34 a barrel
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Spot gold rose 0.2% to $2,414.57 an ounce
This story was produced with help from Bloomberg Automation.
–With help from Jason Scott.
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