Asia stocks nudge higher, gains capped by China worries

A man looks at an electric monitor displaying a stock quotation board outside a bank in Tokyo, Japan, June 5, 2023. REUTERS/Issei Kato

SINGAPORE  – Asian shares inched higher on Thursday as investors took stock of corporate earnings and looked ahead to central bank meetings next week, while disappointing earnings results from Netflix and Tesla pushed U.S. futures lower.

Gains in Asian equities were capped by weak China stocks as the government’s pledge to support the private economy failed to impress investors and as sliding tech stocks dragged the broader market lower.

Meanwhile, China’s yuan shot up after authorities tweaked cross-border financing rules and major state-owned banks were seen selling dollars in moves analysts said were designed to shore up the currency.

Futures indicated that European stock markets were set for a lower open, with Eurostoxx 50 futures down 0.16 percent, German DAX futures down 0.11 percent and FTSE futures down 0.13 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.23 percent higher, on course to snap its three day losing streak. Japan’s Nikkei slid 1.1 percent.

Sterling was last at $1.2944, up 0.05 percent on the day, after sliding 0.7 percent on Wednesday as data showed cooling UK inflation, with markets dialling back expectations of further aggressive rate hikes from the Bank of England.

“Whether that suggests the BoE may be finally gaining traction with rate rises is unclear, though markets have certainly taken it as a sign of a broad-based downturn in inflation,” said Tapas Strickland, head of market economics at National Australia Bank in Sydney.

Strickland cautioned that elevated wage growth will remain a concern for policymakers, which could keep underlying inflation pressures high.

The Bank of England is due to meet in the first week of August but before that central bank meetings in Japan, Europe and the United States will likely grab investors’ attention.

Traders and analysts expect the European Central Bank to raise its benchmark rate by 25 basis points next week but what comes after that has been up for debate in the wake of recent dovish tone taken by the central bank’s policymakers.

Bank of Japan Governor Kazuo Ueda said this week there was still some distance to sustainably and stably achieving the central bank’s 2 percent inflation target, dousing speculation of a hawkish policy shift next week.

Markets seem a lot more certain of the Federal Reserve’s next steps, with traders expecting a 25 basis point hike but no more after that.

China stocks have been under pressure in recent weeks as soft economic data weighed on sentiment, with investors waiting for meaningful stimulus to jump start the country’s stuttering post-pandemic recovery.

Daleep Singh, chief global economist at PGIM Fixed Income, said China’s current recovery is unlike others as it relies on consumer-led growth following years of credit fueled investment in property and infrastructure.

“However, the consumer already appears to be losing momentum. Moreover, there is no evidence as of yet that the property slump is bottoming out… we anticipate that fiscal stimulus will focus on local governments.”

On Thursday, the Shanghai Composite Index was 0.33 percent lower, while Hong Kong’s Hang Seng Index gained 0.26 percent

In Taiwan, TSMC, the world’s biggest chipmaker, posted a 23.3-percent fall in second-quarter net profit, as global economic woes dented demand.

U.S. futures fell in Asian trade, with E-mini futures for the S&P 500 0.15 percent lower and Nasdaq futures down 0.44 percent after earnings from streaming giant Netflix and EV maker Tesla.

Netflix disappointed Wall Street on Wednesday with second-quarter revenue that fell short of analyst estimates, while Tesla reported quarterly automotive gross margin in line with Wall Street estimates, though it was a far cry from a year earlier.

In the currency market, the onshore yuan jumped after the central bank relaxed a cross-border financing rule, making it easier for domestic firms to raise funds from overseas markets and easing depreciation pressure on the yuan currency.

The Australian dollar rose 0.86 percent to $0.683 after strong domestic jobs data. [FRX/]

In commodities, Chicago wheat futures spiked 1.4 percent higher to hit a three-week high on growing expectations that an attack on Ukrainian ports after Russia’s withdrawal from a Black Sea export deal would have a longer-term impact on global supply.