Ground laid for stock bounce, services PMIs on deck

A look at the day ahead in Asian and global markets

By Jamie McGeever, Columnist, Global Finance & Markets

Last updated at 4:28 AM GMT time

Data refreshes every time you open this email. For more Asian market news, click here. Please send any feedback to morningbid@thomsonreuters.com” rel=”noopener” target=”_blank” style=”text-decoration: underline; color: #005da2;”>morningbid@thomsonreuters.com.

Third time lucky for Asian stocks?

Having followed Monday’s listless start to the quarter with a 0.5% decline on Tuesday, Asian stocks are poised to rebound on Wednesday thanks to a triple-boost from tech-fueled rise in U.S. and global stocks, falling Treasury yields and a weaker dollar.

That’s as positive a global backdrop as investors in Asian equities can expect, although it may be altered by the slew of service sector purchasing managers index reports from around the continent including economic powerhouses China and Japan.

People walk at a restaurant complex in Chengdu, Sichuan province, China April 13, 2024. REUTERS/Tingshu Wang

Cross-asset volatility should provide a helping hand too – the VIX index slipped to a five-week low on Tuesday and currency market vol eased across the board. Even overnight and one week dollar/yen vol fell, suggesting investors are not overly concerned about the prospect of Japanese intervention.

Graphics are produced by Reuters.

Tuesday’s market-friendly conditions were in large part laid by Federal Reserve Chair Jerome Powell’s comments at the ECB’s annual policy conference in Sintra, Portugal. While the Fed needs more data before cutting interest rates, the U.S. is back on a “disinflationary path,” Powell said.

Bond yields retraced some of Monday’s steep rise, the dollar dipped, and stocks rose – a collective easing of financial conditions that is usually good for risk appetite and emerging market assets.

The tech sector was a solid performer on Wall Street again, with Tesla shares up 9% to a fresh six-month high and bringing the gains so far this week up to 15%. Having significantly lagged most Big U.S. Tech this year, they are on track for their best week in 18 months.

Investors cheered the fact that the automaker reported a smaller-than-expected 5% drop in vehicle deliveries in the quarter, and analysts said that sales in China were higher than expected too.

Graphics are produced by Reuters.

Strength across the broader tech complex and especially in mega caps pushed the NYSE FANG index to another record high on Tuesday. Can this feelgood factor spread to Asia? It hasn’t lately, and Asian tech has underperformed badly in recent weeks.

The Hang Seng tech index fell again on Tuesday – its seventh decline in eight sessions – to its lowest since April 24. It has lost 15% since mid-May, in which time the S&P info tech index has risen 15%.

Time for a bounce on Wednesday?

On the economic front, the calendar on Wednesday will be dominated by service sector PMIs from China, Japan, Australia, Singapore and India.

China’s is the ‘unofficial’ Caixin PMI index, which shows that services activity expanded in May at its fastest pace since July last year and has been consistently growing since January 2023. 

Morning Bid is sent every weekday morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.

Want to stop receiving this email? Unsubscribe here. To manage which newsletters you’re signed up for, click here.

Reuters Terms & Conditions and Privacy Statement