23-8-2023 (SYDNEY) Asian shares remained stable on Wednesday as investors eagerly awaited the results from tech giant Nvidia to assess the resilience of the sector’s high valuations amidst a surge in bond yields. However, somber factory readings from Japan continued to cast a shadow on market sentiment.
S&P 500 futures saw a modest increase of 0.3 percent, while Nasdaq futures rose by 0.4 percent. MSCI’s broadest index of Asia-Pacific shares, excluding Japan, showed a slight gain of 0.1 percent, hovering close to the nine-month low reached just two sessions ago. Japan’s Nikkei experienced a meagre rise of 0.2 percent.
The latest data revealed that Japan’s factory activity contracted for the third consecutive month in August, providing an initial insight into the state of global manufacturing this month. The United States is also expected to release its flash PMI readings on Wednesday, which are likely to indicate continued contraction in the factory sector.
Chinese shares relinquished some of their gains, with blue-chip stocks dropping by 0.7 percent after a previous day’s recovery of 0.8 percent. Hong Kong’s Hang Seng Index also dipped by 0.1 percent following a 1 percent surge.
Metal prices, on the other hand, continued their upward trajectory for the second consecutive day, with iron ore prices rising by as much as 3.2 percent and coking coal futures experiencing a similar increase.
Investors are anxiously awaiting the financial results of chip company Nvidia, scheduled to be released late on Wednesday. Nvidia’s impressive performance in the previous quarter fueled a rally in tech stocks and fostered hopes for artificial intelligence, consequently driving the S&P 500’s success this year.
Nvidia shares reached an all-time high of $481.87 overnight, with options data indicating that traders anticipate a larger-than-usual swing in share prices following the quarterly results.
Analysts predict a 110 percent growth in third-quarter revenue to $12.50 billion for Nvidia. Stuart Humphrey, an analyst at JPMorgan, mentioned that some forecasts have reached $14-15 billion.
“While this estimate seems slightly high to me, if it comes close to this figure, one could argue that even if demand eventually declines next year, it will still be rerated higher,” Humphrey stated.
On the previous day, Wall Street was impacted by rising yields that reached fresh 16-year highs. The Dow Jones fell by 0.5 percent, the S&P 500 lost 0.3 percent, and the Nasdaq Composite added 0.1 percent.
Financial shares underperformed, with S&P 500 banks experiencing a decline of 2.4 percent, as both S&P and Moody’s downgraded several regional U.S. lenders.
In other areas, Treasuries took a breather from their recent sell-off. Ten-year yields in Asia eased by 2 basis points to 4.3082 percent, after reaching a 16-year peak of 4.3660 percent in the previous session.
The sell-off was triggered by a surge in Treasury issuance, Fitch’s credit downgrade three weeks ago, and concerns that China may sell off Treasuries to support the yuan. Investors are eagerly awaiting the Federal Reserve’s annual summit in Jackson Hole, Wyoming, later this week for further insights into interest rate policies.
Comments from Richmond Fed President Thomas Barkin have raised expectations that Chair Jerome Powell will convey a hawkish message, given the possibility of a “reacceleration scenario” due to robust U.S. economic data.
In the currency markets, the U.S. dollar maintained its strength near a two-month high at 103.5 against a basket of major currencies.
The yen gained 0.2 percent, reaching 145.6 per dollar and moving further away from a nine-month low of 146.56, amid speculation that Japan will only intervene in the market if the currency plummets below 150 to the dollar.
Oil prices remained relatively stable, with Brent crude futures showing little change at $84.00 per barrel, while U.S. West Texas Intermediate crude futures remained flat at $79.7.
Gold prices saw a slight increase, reaching $1,901.2 per ounce.
