21-7-2023 (SYDNEY) Asian shares declined on Friday after Tesla and Netflix’s earnings reports weighed on US tech shares. Meanwhile, the dollar and Treasury yields held steady ahead of an action-packed week that could mark the end of the US tightening cycle. The US Federal Reserve will meet next week, and the Bank of Japan will meet amid speculation of imminent policy tweaks. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5%, heading for a weekly loss of 1.8%. Japan’s Nikkei, meanwhile, lost 0.3%. Taiwan Semiconductor Manufacturing Company’s shares fell more than 3% after the world’s largest contract chipmaker flagged a 10% drop in 2023 sales.
China’s blue-chips dipped 0.2%, while Hong Kong’s Hang Seng Index bucked the trend with a gain of 0.4%. The onshore yuan was 0.2% higher at 7.1674 per dollar after the central bank set a much stronger guidance rate than expected. Authorities have recently stepped up efforts to defend a weakening currency, along with yuan-buying trades by state-owned banks. Concerns are also brewing over the health of Chinese property developers, after rating agencies warned Wanda Commercial could default on its debt repayment.
On Wall Street, the Nasdaq fell 2% overnight, the biggest one-day loss since March. This was driven by steep post-earnings plunges in mega tech stocks Tesla and Netflix. The electric-vehicle maker reported a drop in its second-quarter gross margins to a four-year low, while the streaming video company’s quarterly revenue fell short of estimates.
“In the tech sector, a classic ‘buy the rumour, sell the fact’ type reaction played out for Tesla and Netflix,” said Tony Sycamore, market analyst at IG. “Fellow tech giants Microsoft, Apple, Meta and Amazon will need to shoot the lights out in their earnings reports next week to avoid a similar fate.”
Moreover, an unexpected fall in the US weekly jobless claims fuelled expectations for a strong payrolls report, after markets wagered the Federal Reserve will be mostly done tightening after one last hike in July. They nudged up the chance of a second increase from the Fed by November to 33%, and slightly pared back the size of rate cuts next year to just under 100 basis points.
Ten-year Treasury yields were mostly flat in Asia at 3.8405 per cent, while the US dollar index was little changed at 100.78. The Australian dollar gave up almost all of its gains made after a strong local jobs data release to hover below 68 cents.
Markets are looking ahead to next week when the Fed, the European Central Bank, and the BOJ will be meeting to decide on their policy and debate the rate outlook. “While we anticipate that July will bring the Fed’s last rate increase of this cycle, we do not think the Fed is comfortable signalling that shift just yet. Rather, policymakers appear more comfortable maintaining a hawkish stance for now,” said analysts at TD Securities. Elsewhere, oil prices were higher, and gold prices were 0.2% higher at $1,972.99 per ounce.
Chinese (Simplified)
Filipino
Indonesian
Malay
Thai