Stocks in Asia struggled for direction on Wednesday, following a sluggish US session as investors debated whether the market can maintain its recent rally amidst economic uncertainties.
Equities in Japan saw a decline, while those in South Korea and Australia managed to climb. Futures for Hong Kong indicated a flat open, while US stock contracts remained relatively unchanged. The S&P 500 briefly reached 5,200 before pulling back at the close.
Meanwhile, Treasury 10-year yields remained steady after a drop due to strong demand in a three-year note sale. The Bloomberg dollar index held onto gains from the previous day, while the yen edged lower. Japanese Finance Minister Shunichi Suzuki reassured that the government is prepared to take necessary measures as needed.
In Asia, all eyes are on President Xi Jinping’s visit to Europe and how trade relations will evolve. Geopolitical tensions between China and the West were highlighted as the US revoked licenses that allowed Huawei Technologies Co. to purchase semiconductors from Qualcomm Inc. and Intel Corp.
Global stocks have been attempting to recover from April’s downturn, with optimism stemming from potential Federal Reserve rate cuts and positive earnings reports.
Despite strong consumption and optimism surrounding artificial intelligence, US economic growth slowed in the last quarter while inflation remained high. Fed Bank of Minneapolis President Neel Kashkari hinted that interest rates are likely to remain unchanged for an extended period until officials are confident in reaching their target inflation rate.
In the commodities market, oil prices remained relatively stable as traders monitored tensions in the Middle East and a slightly bearish US stockpiles report.
While US growth momentum remains resilient, it is expected to slow down, which could impact equities. JPMorgan analysts noted that stocks have detached from the Fed’s projections, assuming a growth acceleration that may not materialize.
Key events to watch this week include Toyota earnings, Germany’s industrial production data, and various central bank announcements and economic reports.
Overall, market participants are cautiously optimistic about the future trajectory of stocks, with a focus on economic data and central bank policies shaping investor sentiment.
