Hong Kong Shares Lead Asia Higher, Gold Retreats: Markets Wrap

(Bloomberg) — Stocks in Asia rose, led by Hong Kong, after Wall Street rebounded from a $2 trillion selloff on optimism that big tech leaders would report strong profits this week.

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Technology companies pushed Hong Kong indicators higher after UBS Group AG upgraded Chinese stocks to overweight, citing resilient profits despite the country’s real estate and macroeconomic concerns. Japanese stocks maintained their advance even as the yen briefly strengthened against the dollar after Finance Minister Shunichi Suzuki warned against excessive currency movements.

“From an earnings perspective, Asia is expected to see strong growth” compared to other markets, said Dong Chen, chief Asia strategist at Banque Pictet. Chen said he expects companies in India, South Korea, Taiwan and China to lead the region’s profit growth.

Investors are waiting to see whether earnings will meet high expectations for artificial intelligence this week, as about 180 companies — representing more than 40% of the S&P 500’s market value — are scheduled to report results. The focus on earnings comes after a rout fueled by geopolitical fears and indicates the Federal Reserve will be in no rush to cut rates.

U.S. stock futures were little changed after the S&P 500 rose above 5,000 – ending a six-day rout – while the Nasdaq 100 rose 1%, Nvidia Corp. leading gains in big tech. Apple Inc. was named a top pick for 2024 by Bank of America Corp. because of his optimism about his future results.

Treasuries were flat in Asia ahead of a wave of bond auctions that will test investor appetite after yields hit their highest level in 2024. Australian and New Zealand bonds advanced .

The dollar remained stable against its main competitors, as the pause in its recent rise brought relief to the region’s markets. A broader gauge of emerging market currencies rose in four out of five sessions after hitting a 2024 low last week.

Elsewhere, the Bank of Japan is expected to leave its benchmark interest rate unchanged on Friday, with investors focusing on any signs of a less dovish stance as the yen trades around a 34-year low.

In Asia, attention returns to China’s role as a major lender to developing countries, with a report saying its central bank chief wants creditors involved in debt restructurings to agree on the way to fairly share the burden of relief.

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On the corporate side, Chinese bubble tea maker Sichuan Baicha Baidao Industrial Co. plunged more than 31% in its Hong Kong stock market debut, highlighting the challenges the financial hub faces in reviving investor confidence . Shares of Tianjin Construction fell 30% in their Hong Kong debut.

Gold extended losses after its biggest daily decline in nearly two years as tensions in the Middle East eased and signs the Federal Reserve will keep rates higher to suppress demand for longer. Oil climbed as traders assessed next steps between Israel and Iran amid signs of easing hostilities after an exchange of attacks last week.

Increased income

Nearly two-thirds of 409 respondents to Bloomberg’s Markets Live Pulse survey said they expected earnings to provide a boost to the U.S. equity benchmark. This is the highest vote of confidence in the benefits since the poll began asking the question in October 2022.

The challenge for S&P 500 returns this earnings season is that companies will need to produce earnings — and prospects — that support already high multiples, according to Megan Horneman of Verdence Capital Advisors.

Indeed, the stakes are high for the “Magnificent Seven” megacaps, whose profits are expected to rise nearly 40% from a year ago, according to Bloomberg Intelligence.

Microsoft Corp., Alphabet Inc., Meta Platforms Inc. and Tesla Inc. report earnings this week, kicking off earnings for the so-called Magnificent Seven. With AI seen as the key to future profits, its contribution to profit composition is a priority for traders, said a BofA team including Ohsung Kwon and Savita Subramanian.

Key events this week:

• Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Tuesday

• New home sales in the United States, Tuesday

• Tesla and PepsiCo results on Tuesday

• BOE Chief Economist Huw Pill Speaks Tuesday

• IFO business climate in Germany, Wednesday

• US durable goods, Wednesday

• Results from IBM, Boeing and Meta Platforms, Wednesday

• US GDP, wholesale stocks, initial jobless claims, Thursday

• Results from Microsoft, Alphabet, Airbus, Thursday

• Japan rate decision, Tokyo CPI, inflation and GDP forecasts, Friday

• US personal income and spending, PCE deflator, University of Michigan consumer sentiment, Friday

• Exxon Mobil, Chevron results, Friday

Some of the main market movements:

Actions

• S&P 500 futures were little changed as of 12:56 p.m. Tokyo time

• Nasdaq 100 futures fell 0.1%

• The Japanese Topix rose 0.2%

• Australia’s S&P/ASX 200 rose 0.4%

• Hong Kong’s Hang Seng rose 1.6%

• The Shanghai Composite index fell 0.4%

• Euro Stoxx 50 futures rose 0.5%

Currencies

• Bloomberg Dollar Spot Index little changed

• The euro was little changed at $1.0656

• The Japanese yen was little changed at 154.73 per dollar.

• The offshore yuan was little changed at 7.2532 per dollar.

Cryptocurrencies

• Bitcoin little changed at $66,532.2

• Ether fell 0.2% to $3,186.46

Obligations

Raw materials

• West Texas Intermediate crude rose 0.4% to $82.24 a barrel

• Spot gold fell 1% to $2,303.82 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from Jason Scott.

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