Chinese Stocks Lead Losses, Yen Under Pressure

Investors continued to monitor China’s COVID crisis and movements in the Japanese yen. However, Asia-Pacific stocks were divided in Thursday trade.

Chinese stocks led regional losses, with the Shanghai composite down 1.6 percent and the Shenzhen component down 1.894 percent. The Hang Seng index in Hong Kong fell 1.65%.

Investors are looking for evidence of policy assistance from Chinese officials as the mainland deals with its most severe Covid epidemic since the pandemic began in 2020. Its strict zero-Covid policy has cast doubt on China’s economic prospects.

China is still “well-positioned to further drive growth,” mainly because inflation is “not an issue.”

The Nikkei 225 index in Japan rose 1.23 percent, while the Topix index rose 0.61 percent. The Kospi in South Korea rose 0.43 percent.

In Australia, the S&P/ASX 200 index rose 0.34 percent.

The MSCI Asia Pacific ex-Japan index fell 0.56 percent.

Overnight, Wall Street stocks were mixed. The Dow Jones Industrial Average gained 249.59 points, or 0.71 percent, to close at 35,160.79. The S&P 500 fell slightly to 4,459.45, while the tech-heavy Nasdaq Composite dropped 1.22 percent to approximately 13,453.07.

Yen Watch

The Japanese yen was trading at 128.46 per dollar, having risen from levels above 129 against the US dollar yesterday.

Still, the Japanese yen is weaker than last week, when it was trading below 126 against the US dollar. For weeks, the yen has struggled against the dollar amid expectations that the Bank of Japan will be slower than the US Federal Reserve normalizes monetary policy.

Buying on dips will continue to be a theme as long as the Fed maintains its hawkish language and the BOJ maintains its unlimited bond-buying program.”

Dow Jones Industrial Average futures gained around 70 points or 0.2 percent. The S&P 500 futures rose 0.3 percent, while the Nasdaq 100 futures rose 0.5 percent.

First-quarter earnings announcements on Wednesday dominated after-hours trading. After reporting better-than-expected results, Tesla gained over 5%, while United gained more than 7% after forecasting a profit in 2022. Netflix shares fell the most in a single day since 2004 on Wednesday, as the streaming service disclosed its first subscriber loss in more than a decade. Other streaming businesses, such as Disney and Roku, were also down, as were other tech equities.

In late March, some executives sensed a resurgence in growth. For example, Los Angeles Capital Management discovered that investor preferences had shifted from value to increase since the last week of March. It was partly because investors had gotten acclimated to global macroeconomic volatility and were ready to move away from defensive tactics.