Asian stocks rose on Tuesday, buoyed by another record-setting performance on Wall Street, while oil prices tumbled as concerns over an Israeli attack on Iranian energy facilities diminished. The MSCI Asia Pacific Index climbed 0.7%, fueled primarily by gains in the technology sector, which mirrored the positive momentum from U.S. markets. Meanwhile, Japan’s Nikkei 225 Stock Average returned to heights not seen since July, as benchmarks in Australia and Taiwan also recorded notable advances.
U.S. markets have been on a tear, with the S&P 500 surging nearly 1% on Monday, marking its 46th record of the year. Much of this rally has been led by megacap technology companies, with Nvidia, Apple, and Tesla among the standout performers. Nvidia in particular has been a driving force, leading gains in the tech-heavy Nasdaq 100, which added 0.8% on Monday. Analysts see the market’s optimism as a sign that investors are shrugging off concerns about potential earnings declines and instead banking on positive surprises during the third-quarter earnings season.
Apple received a boost after a bullish analyst report, while Tesla rebounded following a steep decline last week. Financial heavyweights Goldman Sachs and Citigroup also saw gains ahead of their earnings reports this week, suggesting that the broader financial sector may also be poised for growth.
Oil Prices Drop as Geopolitical Concerns Ease
In commodity markets, oil prices fell sharply following a report by the Washington Post that Israel does not plan to target Iranian oil or nuclear facilities in its ongoing conflict with Hamas. This announcement calmed market fears of an immediate disruption in the global oil supply, sending the price of West Texas Intermediate (WTI) crude down 3.2% to $71.47 a barrel.
The Middle East remains a significant player in global energy markets, and any disruption to Iran’s oil output could have far-reaching implications for oil prices. However, with the immediate risk of a strike reduced, traders are now reassessing the global supply-demand balance, especially as the demand outlook remains uncertain amid sluggish economic activity in key markets like China.
Asian Markets: Japan and Australia Shine, China Stumbles
Across Asia, Japan’s Topix rose by 1.1%, driven by optimism in the semiconductor sector. Japanese equities have benefited from strong corporate earnings and a positive macroeconomic environment, with investors noting that Japanese stocks remain undervalued compared to their global peers. Naoki Fujiwara, senior fund manager at Shinkin Asset Management, remarked, “Considering the situation in the U.S. and China, there are no selling factors in the macro environment, and Japanese stocks are undervalued.”
Australia’s S&P/ASX 200 followed suit, gaining 0.8%, with mining and energy stocks leading the charge. Taiwan also saw gains, driven by strength in its technology sector, particularly in semiconductor stocks that are closely linked to global tech giants.
In contrast, Chinese and Hong Kong markets faced headwinds. The Shanghai Composite fell 0.6%, while Hong Kong’s Hang Seng Index dropped 1.4%. Investors are waiting for further stimulus measures from the Chinese government after Monday’s trading session saw a modest rise despite a highly anticipated Finance Ministry briefing failing to deliver new incentives. Market participants had hoped for stronger commitments to stimulate consumption in China, the world’s largest crude importer, but were left disappointed by the lack of concrete details.
Kristina Hooper, chief global market strategist at Invesco, emphasized the need for both monetary and fiscal stimulus in China to drive long-term economic growth. “It’s very important that we get the two components of stimulus together, the monetary stimulus and the fiscal stimulus, and we’re getting both,” she said on Bloomberg Television. Hooper added that fiscal stimulus targeted at key areas would be crucial for sustaining improvements in the Chinese economy and boosting market sentiment.
China’s Economic Struggles Continue
Despite some positive signs, China’s economic challenges persist. A report released on Monday showed that export growth in September climbed by just 2.4% year-over-year, marking the lowest level since May. This weak export performance underscores the broader challenges facing China’s economy, including a slowdown in domestic consumption, a struggling property market, and reduced revenue from land sales.
Adding to the government’s fiscal concerns, Chinese media outlet Caixin reported that the country is considering raising 6 trillion yuan ($846 billion) over the next three years through the issuance of special government bonds. These funds are intended to support the sputtering economy by financing infrastructure projects and stimulating consumption. Furthermore, the government has reportedly begun enforcing a long-ignored tax on overseas investment gains, targeting the country’s ultra-wealthy in an attempt to bolster revenue.
Steve Brice, chief investment officer at Standard Chartered Wealth Solutions Group, noted that China’s policy measures would need to gain momentum to have a meaningful impact on the economy. “The fundamentals need to see this tailwind from policy to kick the economy going again,” he told Bloomberg Television.
Japanese IPO Signals Strong Market Demand
In a sign of robust demand in Japan’s capital markets, Tokyo Metro Co. raised ¥348.6 billion ($2.3 billion) through its initial public offering, making it the largest listing in the country in six years. The company priced its shares at the top end of the marketed range, reflecting investor confidence in the transportation sector and the broader Japanese economy.
This IPO highlights a growing appetite for Japanese equities, which have been bolstered by the country’s stable economic outlook and strong corporate earnings. Investors are also hopeful that continued fiscal and monetary support will sustain growth in the medium to long term.
Hong Kong Eyes Economic Boost from Annual Policy Speech
Hong Kong’s financial markets are gearing up for Chief Executive John Lee’s annual policy address on Wednesday. Market participants are expecting the speech to focus on revitalizing the city’s economy, which has faced headwinds from the prolonged pandemic and geopolitical tensions. Speculation is rife that Lee may announce measures such as a cut to the liquor tax and initiatives aimed at reinforcing Hong Kong’s status as a global financial hub.
Hong Kong has been striving to attract more foreign investment and enhance its competitiveness, especially as neighboring economies like Singapore continue to grow in prominence. Investors will be closely watching Lee’s address for any clues on policy changes that could boost economic activity in the territory.
U.S. Earnings Season in Focus
As earnings season ramps up in the U.S., traders are watching closely to see how corporate America fared in the third quarter. Financial giants JPMorgan Chase and Wells Fargo unofficially kicked off earnings season on Friday, and their results will be followed by a slew of other big banks, including Goldman Sachs and Bank of America, which are set to report later this week. Key non-financial companies like Netflix and JB Hunt Transport Services will also release earnings reports that could shape investor sentiment.
Early results indicate that companies are benefitting from the Federal Reserve’s easing cycle, with lower interest rates providing a tailwind for corporate profits. Analysts at Bank of America, including Ohsung Kwon and Savita Subramanian, noted that despite some headwinds, Corporate America is well-positioned to deliver solid results as interest rate cuts filter through the economy.
Global Economic Calendar
Several key economic events are scheduled for the remainder of the week that could impact market sentiment. In the U.S., investors will be watching for retail sales data, jobless claims, and industrial production figures on Thursday. Meanwhile, the European Central Bank (ECB) will announce its rate decision on Thursday, and China’s GDP data for the third quarter is due on Friday.
In the U.S., Federal Reserve officials, including Mary Daly, Austan Goolsbee, and Christopher Waller, are scheduled to speak throughout the week, offering potential clues about the central bank’s future monetary policy path.
Currency and Bond Markets
In currency markets, the yen rose 0.1% against the U.S. dollar but remained near the psychologically significant level of 150. The offshore yuan weakened, falling 0.3% to 7.1158 per dollar, as China’s economic woes continued to weigh on the currency.
In bond markets, U.S. Treasury yields edged lower on Tuesday, with the 10-year yield slipping by one basis point to 4.09%. Japanese and Australian bond yields moved in opposite directions, with Japan’s 10-year yield rising by one basis point and Australia’s 10-year yield falling by two basis points.
Bitcoin Steadies as Crypto Outlook Improves
In the cryptocurrency space, Bitcoin steadied after a 5% surge on Monday, holding around $65,676.95. Market optimism has been driven by growing indications that U.S. regulatory clarity for the cryptocurrency sector could improve after the 2024 presidential election, providing a tailwind for digital assets.
As the week progresses, traders will remain focused on the outcome of corporate earnings reports and key economic data releases, which are likely to shape the direction of global markets heading into the final months of the year.
