Asian shares jump on tech boost; fragile yen on intervention watch


SINGAPORE: Asian stocks rose sharply on Wednesday led by tech stocks as investors' focus shifts to earnings from U.S. tech bellwethers this week, while the yen remained mired near 34-year lows, keeping traders wary of intervention from Japanese authorities.

An after-hours surge in shares of EV maker Tesla following its promise of new models, and upbeat earnings from some U.S. companies lifted sentiment, spurring a rally in tech stocks across Asia, with Taiwan, South Korean and Japan's Nikkei leading the charge.

MSCI's broadest index of Asia-Pacific shares outside Japan was 1.6% higher, having climbed 1% on Tuesday, as stocks rebounded from last week's steep selloff.

China stocks were mixed, with the blue-chip index flat, while Hong Kong's Hang Seng Index added 2%.

The risk-on rally is set to continue in Europe, with Eurostoxx 50 futures up 0.40%, German DAX futures up 0.33% and FTSE futures 0.60% higher.

Tesla kicked off the earnings season for U.S. tech megacaps, announcing the launch of new electric vehicle models that sent its shares up 12.5% in extended trading. The gains came despite Tesla releasing first-quarter results that missed expectations.

U.S. stocks closed higher as companies such as automaker General Motors reported strong earnings. E-mini futures for the S&P 500 rose 0.38%, while Nasdaq futures was 0.7% higher.

The earnings-packed week includes results from tech giants Meta Platforms, Alphabet and Microsoft , and will likely set the tone for the near term.

"Expectations are also set for upcoming earnings from major U.S. tech companies like Meta, potentially maintaining a positive atmosphere in the tech sector ahead of these releases," said Anderson Alves, a trader with ActivTrades.

Beyond corporate earnings, traders are also focused on U.S. gross domestic product figures and the March personal consumption expenditure data - the Fed's preferred inflation gauge - due later this week to gauge the path of U.S. rates.

Markets are now pricing in September for the timing of the Federal Reserve's first rate cut, with expectations of 42 basis points of cuts this year. At the start of the year, traders had priced in 150 bps of easing for the whole year.

The drastic shift has elevated Treasury yields and lifted the dollar in the past few weeks but on Wednesday they were subdued following data that showed U.S. business activity cooled in April to a four-month low due to weaker demand, while rates of inflation eased slightly even as input prices rose sharply.

"The surprisingly soft PMI numbers suggest the US economy will lose some momentum in the second quarter," said Tony Sycamore, a market strategist at IG.

The yield on 10-year Treasury notes was at 4.617% on Wednesday, having dipped to as low as 4.568% on Tuesday following the economic data.

The dollar index, which measures the U.S. currency against six peers, eased 0.066% to 105.60 after a 0.424% drop on Tuesday.

The Australian dollar rose 0.45% to $0.6518, boosted by hotter-than-expected consumer price data that led the markets to price out any expectations of rate cuts this year.

INTERVENTION ZONE

The Japanese yen was last at 154.845 per dollar, just shy of the 34-year low of 154.88 it touched on Tuesday ahead of the Bank of Japan's two-day policy meeting that concludes on Friday. The yen is down nearly 9% this year.

The dollar/yen pair, which is sensitive to U.S. yields, has traded in an extremely narrow range in the past few weeks, with traders wary that a push above 155 could raise the risk of dollar-selling intervention by Japanese officials.

Shusuke Yamada, chief forex and rates strategist at Bank of America, said in a note that the market may take the dollar/yen to 160 quickly and test the Ministry of Finance's (MoF) resolve at that level if the MoF does not intervene at around 155.

Japanese Finance Minister Shunichi Suzuki issued on Tuesday the strongest warning to date on the chances of intervention, saying last week's meeting with U.S. and South Korean counterparts had laid the groundwork for Tokyo to act against excessive yen moves.

Japan last intervened in the currency market in 2022, spending an estimated $60 billion to defend the yen.

IG's Sycamore said if the U.S. core PCE inflation is hotter than expected, "the market will quickly take advantage of the supportive yield backdrop and push the pair towards 156.00".

Oil prices were mostly flat, with U.S. crude at $83.43 per barrel and Brent at $88.47 as investor kept an eye on tensions in the Middle East. - Reuters

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