On Tuesday, Asian stocks experienced mostly positive gains, with the focus of the markets shifting away from the U.S. Federal Reserve towards corporate earnings and economic indicators.
Furthermore, regional markets received a boost from indications that China-U.S. relations might be getting better. The two nations reached an agreement to collaboratively address economic matters, including business and trade-related issues.
Clifford Bennett, the chief economist at ACY Securities, remarked, “This seems more in line with the practical and resolute breakthrough that’s needed. The true outcome will become evident over time, but the markets are justified in reacting positively to these advancements.”
On Monday, Gina Raimondo, the U.S. Commerce Secretary, announced that she and her Chinese counterpart reached an agreement to share information concerning U.S. export controls. Additionally, they have plans to establish a working group to engage in discussions about various other trade-related matters. While this suggests a potential positive development in terms of bilateral communication, it’s important to note that several conflicts persist, encompassing topics such as technology, security, and human rights.
In the initial trading hours, Japan’s key index, the Nikkei 225, inched up by 0.1% to reach 32,209.67. During the morning session, Toyota’s shares experienced a decline of 0.6%. This drop followed the shutdown of 25 vehicle assembly lines at 12 production plants across Japan due to a glitch in the computer system responsible for managing incoming auto parts.
According to Toyota spokesperson Sawako Takeda, the company does not suspect a cyberattack as the cause, yet the exact reason remains under investigation. It remains uncertain when the affected assembly lines will be operational again.
In Australia, the S&P/ASX 200 increased by 0.4%, reaching 7,186.40. South Korea’s Kospi also saw a slight uptick of 0.3%, reaching 2,551.81. Hong Kong’s Hang Seng made a substantial jump of 1.3%, reaching 18,364.86, while China’s Shanghai Composite rose by 0.3% to reach 3,106.59.
On Wall Street, the S&P 500 climbed by 27.60 points, equivalent to a 0.6% increase, reaching 4,433.31. However, despite this rise, the benchmark index remains on track to conclude the month of August with a net loss.
The Dow Jones Industrial Average experienced a rise of 213.08 points, equivalent to a 0.6% increase, reaching a value of 34,559.98. Similarly, the Nasdaq composite saw a gain of 114.48 points, or 0.8%, reaching a level of 13,705.13.
Companies are concluding their most recent round of earnings reports, a majority of which have surpassed analysts’ expectations. Nevertheless, the cumulative profits for the S&P 500 have contracted by approximately 4% due to the ongoing impact of persistent inflation.
This week, notable retailers such as Best Buy, Costco, and Dollar General are among those set to release their financial results.
Following reports that the company had reached a $5.5 billion settlement regarding defective earplugs, 3M’s stock surged by 5.2%, which was a lower figure than anticipated. Additionally, Boston Scientific experienced a 6% increase after delivering a positive update to investors regarding a study involving a heart device.
Hawaiian Electric’s shares skyrocketed by 44.6% in response to the utility company refuting allegations that it was responsible for the wildfire that caused significant damage to the Lahaina community.
Investors are heading into a busy week ahead, brimming with economic reports that have the potential to provide further insights into the current state of the job market’s strength and the trajectory of inflation’s cooling. The forthcoming data carries the potential to offer more indications about the Federal Reserve’s likelihood of maintaining steady interest rates or implementing additional increases before the year concludes.
Consumer confidence will receive an update on Tuesday, a parameter that experienced a significant surge in July and is anticipated to retain its robustness throughout August.
On Tuesday, the government will release the job openings report for July, with the broader jobs report for August scheduled for Friday. Given the job market’s resilience amid elevated inflation, these reports are under close scrutiny.
A focal point for both investors and economists will be Thursday’s release of the government’s most recent inflation update. The report on personal consumption and expenditures is the preferred gauge for the Fed as it endeavors to rein in inflation to a 2% target. In June, the PCE report depicted a 3% inflation increase, and the forthcoming July report is projected to show a slight uptick to 3.3%. This represents a decline from the elevated 7% witnessed a year prior.
In response to combating elevated inflation, the central bank has already elevated its key interest rate to its highest point since 2001, a notable shift from the near-zero levels seen early last year. Although the Fed maintained rates at its recent meeting, the possibility of future rate hikes remains open in its pursuit to address persistent inflation.
Market sentiment on Wall Street indicates an expectation that the Federal Reserve will maintain interest rates at their current levels during the September meeting, as per CME’s FedWatch tool. However, there’s a near-even division of opinions regarding the possibility of a further rate increase before the conclusion of 2023.
On Friday, Powell remarked that forthcoming decisions would be influenced by the information conveyed through incoming economic data reports.
The yield on the 10-year Treasury eased from 4.24% to 4.21% by the close. Meanwhile, the yield on the 2-year Treasury, which is more closely tied to expectations for the Fed, decreased from 5.08% to 5.06% at the end of Friday’s trading session.
Within energy trading, the benchmark U.S. crude experienced a decline of 19 cents, reaching $79.91 per barrel. The international standard, Brent crude, also saw a decrease of 17 cents, ending at $84.25 per barrel.
In the realm of currency trading, the U.S. dollar made a slight descent against the Japanese yen, sliding from 146.54 yen to 146.39 yen. Moreover, the euro exhibited a decrease from $1.0823 to $1.0833.