Hong Kong (AFP) – Asian stocks enjoyed a partial rebound from the previous day’s rout as investors returned to the AI trade, while easing Middle East tensions also provided support and pushed oil prices down. The gains across most equity markets followed a rebound on Wall Street fueled by a race to pick up cheaper assets after a sell-off that was sparked by bets on a US interest rate hike and warnings over tech firms’ valuations.
News that the US economy had created more than double the number of jobs than expected in May indicated it remained in rude health, but also put pressure on the Federal Reserve to tighten monetary policy as it battled surging inflation. This followed disappointing revenue forecasts from chip giant Broadcom, which had sparked jitters about the AI sector that has helped drive markets to record highs this year. A plunge in tech firms in New York on Friday was followed by a similar collapse for their Asian counterparts on Monday, sending Seoul’s Kospi down more than eight percent.
However, analysts noted that the selling was largely driven by profit-taking and could be viewed as a healthy pause in a rally that has been ongoing since March. By Tuesday, Asian investors tracked a bounce in the Nasdaq and S&P 500. The Kospi rallied by more than three percent, while Taipei added almost two percent, with Tokyo, Shanghai, Singapore, Manila, and Wellington also seeing gains. Hong Kong remained flat and Sydney edged down.
“Expectations of tighter monetary policy, combined with underwhelming results from Broadcom last week, raised questions over the pace of the sector’s rally and prompted investors to take profits,” wrote Fiona Cincotta at City Index. “This is by no means the end of the AI trade, but it does suggest that valuations had become stretched in parts of the market.”
Investors also took heart from news that Iran and Israel announced on Monday that they had halted hostilities after exchanging strikes that threatened to reignite the Middle East war. Israeli Prime Minister Benjamin Netanyahu stated that the “fire on that front is contained” just hours after Tehran announced it had stopped its military action. Tehran had launched missiles at Israel on Sunday in response to Israel’s ongoing war against Hezbollah in Lebanon. Israel retaliated, despite efforts by US President Donald Trump to dissuade Netanyahu. This triggered another round of Iranian missile fire before Tehran declared that it would cease fire.
Fears had grown that the flare-up would risk Tehran’s truce with the ongoing conflict, which has been in place since April 8, and jeopardize efforts for peace talks to reopen the Strait of Hormuz, a vital route through which a fifth of global crude usually passes. Oil prices, which had spiked more than five percent earlier on Monday, pared earlier gains, and by Tuesday, they were down.
Eyes are now turning to the release on Wednesday of US inflation figures, which could play a key role in the Fed’s rate decision-making. The consumer price index is expected to hit 4.2 percent, marking a more than three-year high.
– Key figures at around 0210 GMT –
Tokyo – Nikkei 225: UP 1.0 percent at 64,642.31
Hong Kong – Hang Seng Index: FLAT at 24,649.98
Shanghai – Composite: UP 0.3 percent at 3,971.53
West Texas Intermediate: DOWN 0.4 percent at $90.39 a barrel
Brent North Sea Crude: DOWN 0.3 percent at $93.98 a barrel
Euro/dollar: UP at $1.1540 from $1.1531 on Monday
Pound/dollar: UP at $1.3351 from $1.3341
Dollar/yen: DOWN at 160.19 yen from 160.21 yen
Euro/pound: DOWN at 86.43 pence from 86.44 pence
New York – DOW: DOWN 0.2 percent at 50,786.01 (close)
London – FTSE 100: UP 0.1 percent at 10,373.20 (close)
© 2024 AFP
