(Bloomberg) — Stocks in Asia fell after tech heavyweights dragged down US indexes ahead of Federal Reserve Chair Jerome Powell’s testimony to Congress.
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Equity benchmarks edged lower in Japan, South Korea and Australia. Meanwhile, those for Hong Kong indicated gains after a slump on Tuesday. Investors are closely watching the development of China’s congress after official announcements of an ambitious 5% growth target.
US benchmark indexes lost traction after a rally that has spurred concern about sky-high valuations, with caution prevailing before Powell heads to Capitol Hill for his semiannual testimony before Congress. The S&P 500 dropped 1%, while the Nasdaq 100 slipped almost twice as much. Tesla Inc. extended a two-day selloff to 11%, while Apple Inc. suffered its fifth straight loss. Contracts for US equities advanced in early trading.
The Golden Dragon Index of US-listed Chinese shares fell for a second day on Tuesday. Chinese equity markets will likely see rising volatility — particularly for the nation’s stocks traded overseas — after a budget plan announced at the National People’s Congress meeting that Morgan Stanley strategist Laura Wang said “disappoints.”
“The National People’s Congress will be a major driver of Asian markets today, with market participants generally underwhelmed by the messaging about economic support coming from the central government,” said Kyle Rodda, senior market analyst at Capital.Com Inc.
Back in Japan, the nation’s biggest bank expects the Bank of Japan to exit negative interest rate in two weeks and is positioning itself accordingly. Mitsubishi UFJ Financial Group Inc.’s view is much more definitive than the swap market, which rates the chances of BOJ Governor Kazuo Ueda changing policy this month at about 50%.
In the US, Powell is expected to reiterate the lack of urgency to cut rates at his testimony. Wall Street also weighed data showing the US service sector cooled — even as orders and business activity picked up.
Treasury 10-year yields steadied in Asia after falling six basis points to 4.15% with Australian and New Zealand yields tracking those moves early Wednesday. A gauge for dollar strength edged higher Wednesday, gaining against all currencies in a Group-of-10 peers. Elsewhere, Bitcoin hit a record Tuesday, before reversing, while gold also touched an all-time high.
Bullish positioning in US technology stocks is at the highest in three years — raising the risk of a pullback, according to Citigroup Inc.’s Chris Montagu. Long positioning in Nasdaq 100 futures is “extremely extended,” he said.
The “Magnificent Seven” of US stocks — Apple, Microsoft Corp., Nvidia, Amazon.com Inc., Meta Platforms Inc., Alphabet Inc. and Tesla — have powered the S&P 500 to all-time peaks this year, partly fueled by the artificial intelligence frenzy. The rally has left strategists scrambling to lift their 2024 targets — while raising questions on whether tech is seeing a boom or a bubble.
Key Events This Week:
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Canada rate decision, Wednesday
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Eurozone retail sales, Wednesday
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US ADP employment, JOLTS job openings, Wednesday
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Fed Chair Jerome Powell testifies before the House Financial Services Committee, Wednesday
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Fed issues Beige Book, Wednesday
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Fed’s Neel Kashkari (Minneapolis) and Mary Daly (San Francisco) speak, Wednesday
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China trade, forex reserves, Thursday
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European Central Bank’s rate decision, Thursday
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US initial jobless claims, trade, Thursday
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President Joe Biden delivers the State of the Union address, Thursday
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Fed Chair Jerome Powell testifies before the Senate Banking Committee, Thursday
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Cleveland Fed President Loretta Mester speaks, Thursday
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Eurozone GDP, Friday
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US nonfarm payrolls, unemployment, Friday
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New York Fed President John Williams speaks, Friday
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ECB Governing Council member Robert Holzmann speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 9:08 a.m. Tokyo time
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Hang Seng futures rose 0.2%
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Japan’s Topix was little changed
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Australia’s S&P/ASX 200 fell 0.2%
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Euro Stoxx 50 futures fell 0.4%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0853
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The Japanese yen was little changed at 150.08 per dollar
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The offshore yuan was little changed at 7.2128 per dollar
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The Australian dollar was little changed at $0.6500
Cryptocurrencies
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Bitcoin rose 0.6% to $63,683.1
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Ether rose 1% to $3,559.34
Bonds
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The yield on 10-year Treasuries was little changed at 4.15%
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Japan’s 10-year yield was unchanged at 0.700%
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Australia’s 10-year yield declined five basis points to 4.04%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck.
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