Sat. May 25th, 2024

Asian stock markets showed mixed results on Friday, as strong earnings from US tech giants Microsoft and Alphabet tempered concerns about a potential tech rally correction. The news provided some relief after earlier reports had dampened sentiment, particularly with the yen falling to a 34-year low due to the Bank of Japan’s decision to maintain its interest rate stance.

Investor sentiment in Asia was boosted by a positive earnings season, thanks to robust performances by major tech firms. Microsoft and Alphabet’s results exceeded forecasts, with Alphabet also announcing its first dividend. This came amid mixed economic data in the United States, leading to concerns about a potential stagflation scenario as consumer spending fell below expectations and core inflation exceeded estimates.

These results helped propel US stock futures, with tech companies in Asia also experiencing gains. In particular, Hong Kong-listed Meituan, Japan’s Advantest, and Samsung in Seoul were among those riding the momentum. The overall effect of the US tech earnings was visible across the region’s markets, with Hong Kong, Tokyo, Seoul, Taipei, and Manila recording gains.

However, not all Asian markets followed the upward trend. Sydney, Singapore, Wellington, Mumbai, Jakarta, and Bangkok experienced declines, reflecting the lingering uncertainty over the broader economic outlook. The European markets presented a mixed picture, with London achieving a record high while Paris and Frankfurt also saw gains.

On Wall Street, the major indexes ended the previous session in the red, though they managed to recover from their initial lows. The US economy’s growth for the first quarter fell significantly short of expectations, coupled with consumer spending that failed to meet estimates. Additionally, an unexpectedly high core inflation index added to concerns about the US economic trajectory.

Investors are now closely watching the Federal Reserve’s upcoming announcement on its preferred gauge of inflation, the Personal Consumption Expenditures (PCE) index, to gain insights into future interest rate policies. This comes after several months of above-forecast consumer price index readings, leading to uncertainty regarding how the Federal Reserve might respond to inflationary pressures.

Meanwhile, in Tokyo, the yen’s downward trend continued, hitting 156.82 against the dollar by Friday afternoon. This has fueled speculation about potential intervention by Japanese officials, following the Bank of Japan’s decision to maintain interest rates, in contrast to last month’s rate hike. The persistent decline in the yen has raised concerns and prompted warnings from officials about possible measures to support the currency.

Overall, the mixed signals from global markets underscore the delicate balance between positive earnings and broader economic challenges. Investors are cautiously optimistic but remain vigilant about ongoing inflationary pressures and economic growth trends.

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