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Most Asian Stocks Drop on Tuesday following discouraging business activity data from Japan and Australia. However, Chinese markets managed to bounce back from pre-pandemic lows as a state-run fund initiated the purchase of equities.
Weak Sentiment Lingers
Ongoing concerns related to the Israel-Hamas conflict have kept any significant gains in check. While diplomatic missions aimed at de-escalating the situation showed some progress, missile attacks between Israel and Gaza persisted. Markets remained on edge over the potential for an Israeli ground assault on Gaza, which could exacerbate the conflict.
The retreat of Treasury yields from multi-year peaks reached earlier this month provided some support to stock markets. Nevertheless, the technology sector continued to face pressure.
Weak Japan and Australia PMIs Dent Market Sentiment
Japan’s Nikkei 225 saw a 0.4% drop, while the TOPIX slid by 1%. This decline followed the release of purchasing managers’ index (PMI) data, revealing that Japanese manufacturing activity contracted more than anticipated in October, alongside a deterioration in the services sector.
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Australia’s ASX 200 managed to rise by 0.1%, recovering from early losses and aligning with Chinese stocks. However, PMI data indicated that both Australian manufacturing and services activities remained in contraction throughout October.
Market focus has now shifted to the forthcoming PMI readings from the U.S., scheduled for later in the day.
Asian Stocks Drop & Rebound Supported by State Fund
China’s Shanghai Shenzhen CSI 300 index experienced a 0.4% increase, recovering from its lowest point since January 2019. The Shanghai Composite added 0.7%, rebounding from an 11-month low.
Central Huijin Investment Co., a Chinese sovereign fund, announced its purchase of some exchange-traded funds (ETFs) this week to bolster local stock markets. Additionally, the fund indicated its intention to increase its local ETF holdings, providing further support to Asian Stocks Drop.
China’s stock market had been grappling with concerns about a property market downturn and a sluggish economic recovery. The emergence of government buying, however, seemed to lend some stability.
Tech Sector Faces Challenges from High Yields and Earnings Anticipation
Technology-heavy indexes emerged as the poorest performers of the day, enduring continued pressure from high yields. The anticipation of key U.S. tech earnings, including Microsoft Corporation (NASDAQ: MSFT), Alphabet (NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), Intel Corporation (NASDAQ: INTC), and Amazon (NASDAQ: AMZN) later in the week, made traders cautious about the sector’s performance. They sought to determine whether the steady earnings growth observed earlier this year would persist through the third quarter.
While yields saw some decline during the week, they remained close to multi-year highs as markets positioned themselves for the possibility of higher U.S. interest rates.
Market Performance in Various Regions
Hong Kong’s Hang Seng index saw a 0.5% decline, reducing early losses after hitting an 11-month low earlier in the session. Nevertheless, the index continued to be weighed down by losses in heavyweight technology Asian Stocks Drop.
South Korea’s KOSPI fell by 0.2%, while the Taiwan Weighted index sank by 0.8%. Taiwan shares were further rattled by reports of China launching a tax probe into Apple Inc (NASDAQ: AAPL) supplier, Foxconn Technology Co Ltd (TW: 2354).
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Disclaimer:
Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
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