Shares in Asia experienced a mixed performance on Tuesday, with Chinese stocks surging after a government investment fund revealed plans to increase stock purchases. Additionally, reports circulated that Chinese leader Xi Jinping was set to meet with officials to discuss market concerns. Meanwhile, oil prices rose, and U.S. futures showed a diverse trend.
According to Bloomberg, President Xi was slated to receive a briefing from officials regarding the market situation, showcasing the Communist Party's unease about the considerable losses suffered by Chinese markets over recent years. While the timing of this briefing remained uncertain and the report was unconfirmed, the markets reacted positively, with the Hang Seng index in Hong Kong surging 4% to 16,133.60. This rally was largely led by technology shares, with e-commerce giant Alibaba gaining 7.7%, JD.com rising 7.7%, and online food delivery company Meituan jumping 6.5%.
In mainland China, the Shanghai Composite index climbed 3.2% to reach 2,789.49. The Shenzhen Component index, representing China's smaller main market, soared 6.2%, and the CSI 1000, an exchange-traded fund associated with 'snowball derivatives,' surged by 7%. Snowball derivatives are investment products that can yield substantial gains but also carry heightened risks of exaggerated losses.
Another move to support the faltering markets came from China's Central Huijin Investment, a sovereign fund that owns major state-run banks and other government-controlled enterprises. The fund vowed to expand its purchases of stock index funds, a strategy it periodically deploys to counter intense selling pressure in Chinese markets. On Monday, this tactic manifested in Shanghai and Shenzhen benchmarks fluctuating between small gains and significant losses, while share prices of state-run banks and large corporations experienced modest increases.
Elsewhere in Asia, Tokyo's Nikkei 225 index declined 0.5% to 36,160.66, and South Korea's Kospi lost 0.6% to 2,576.20. Australia's S&P/ASX 200 also fell by 0.6% to 7,581.60. However, other markets showed resilience, with Bangkok's SET gaining 1% and India's Sensex rising 0.5%.
On Wall Street, stocks slipped on Monday as data revealed a robust economy, potentially delaying anticipated interest rate cuts that investors were counting on. The S&P 500 fell 0.3%, retreating from its all-time high set on Friday. The Dow Jones Industrial Average dropped 0.7%, and the Nasdaq composite edged down by 0.2%.
Bond yields were another factor putting pressure on stocks, as they continued to rise. Investors tried to digest signals from the Federal Reserve suggesting that the expected reduction in the main interest rate might not occur as soon as anticipated. Federal Reserve Chair Jerome Powell reiterated in a recent interview that the Fed could potentially lower interest rates three times this year due to the cooling inflation. However, he also cast doubt on a March rate cut, as previously speculated by many traders.
The yield on the 10-year Treasury remained relatively steady, standing at 4.15% early Tuesday. Consequently, U.S. services industries appear to be more robust than economists had forecast, with healthcare and social assistance leading the charge, according to the Institute for Supply Management. Such strong economic indicators might prompt the Federal Reserve to hold off on cutting rates further, as they could contribute to upward pressure on inflation. On the other hand, the strength of the U.S. economy dispelled concerns of an impending recession, which bodes well for company profits and, ultimately, stock prices in the long term.
In other trading news, U.S. benchmark crude oil rose 26 cents to reach $73.04 per barrel on the New York Mercantile Exchange. The international standard, Brent crude, also experienced an increase of 29 cents, reaching $78.28 per barrel. Lastly, the dollar slipped slightly against the Japanese yen, falling to 148.60 yen from 148.68 yen, while the euro rose to $1.0757 from $1.0743.
In conclusion, Asian markets presented a mixed performance, with Chinese stocks surging after news of increased stock purchases by a government investment fund. Reports about President Xi Jinping meeting with officials to discuss market concerns further added to the positive sentiment. Meanwhile, U.S. futures showed varied trends, and oil prices rose. The possibility of delayed interest rate cuts in the U.S., driven by a strong economy and rising bond yields, influenced Wall Street's performance. Despite these challenges, the robustness of the U.S. services industry signals economic strength, which could support long-term growth in company profits and stock prices.
