Concerns about the Chinese economy countered optimism over a Wall Street rally on Tuesday, resulting in a general decline in Asian stocks.
The stock market rose in Tokyo but declined in the majority of regional markets. Monday’s reopening of Hong Kong’s benchmark market after a weather-related closure resulted in a loss of nearly 2%.
China reported sluggish economic growth for the spring than the majority of economists anticipated on Monday. Its recovery after the elimination of anti-COVID restrictions has underperformed expectations. This has served to limit global inflation, but it also hinders a key growth engine for the global economy.
Japan’s benchmark Nikkei 225 rose 0.2% to 32,438.27. On Monday, Tokyo’s markets were also shuttered for a holiday. The S&P/ASX 200 in Australia fell 0.3% to 7,270.00. The South Korean Kospi fell 0.5% to 2,606.19 points. The Hang Seng in Hong Kong fell 1.9% to 19,037.07 and the Shanghai Composite fell 0.3% to 3,200.76.
The S&P 500 on Wall Street climbed 0.4% to 4,522.79, its highest closing level in 15 months. The Dow Jones Industrial Average rose 0.2% to 34,585.35, whereas the Nasdaq composite rose 0.9% to 14,244.95.
The U.S. economy has remained resilient, avoiding recession so far despite significantly higher interest rates intended to curb inflation.
Earnings Season Heats Up
The upcoming week will provide more information on how the economy has affected companies as the earnings season for corporations intensifies. This week, nearly 60 companies in the S&P 500 are expected to report their April-June earnings.
Expectations are modest. According to FactSet, analysts are predicting the worst decline in earnings per share for S&P 500 companies since the pandemic ravaged the economy in the spring of 2020. Additionally, they anticipate a third consecutive quarter of declining profits.
Several banks and Delta Air Lines began the reporting season last week with better-than-expected results. There will be reports from Bank of America, Netflix, and Tesla, among others, during the upcoming week.
While last week’s earnings reports represent a small sample size, Bank of America strategists are optimistic about the season’s start because corporate forecasts for future results have been generally optimistic.
In a report for BofA Global Research, strategists led by Savita Subramanian stated, “We expect the momentum to continue.” They anticipate the bottoming out of earnings declines for S&P 500 companies during this reporting season.
This week will also bring the most recent monthly update on retail sales in the United States. The robust spending of U.S. consumers has been one of the primary contributors to the economy’s resilience, which has been fueled by a remarkably robust labor market.
Critics are warning that it is not certain that the economy will avoid a recession, that inflation will continue to decline, and that corporate profits will recover in response to the stock market rally.
It is widely anticipated that the Fed will raise interest rates at its meeting next week, bringing the federal funds rate to its highest level since 2001. Nonetheless, traders are hopeful that this will be the final increase of this cycle.
Investors believe that large technology and other high-growth stocks are among the largest beneficiaries of lower interest rates.
Monday’s market increase was aided by a number of factors, including Tesla’s 3.2% gain. Tesla also announced over the weekend that its first Cybertruck electric pickup has rolled off the assembly line, nearly two years behind schedule.
In energy trading, the price of U.S. benchmark crude oil increased by 29 cents to $74.44 per barrel on the New York Mercantile Exchange. On Monday, it fell $1.27 to $74.15 per barrel. Brent crude, the international benchmark, increased by 27 cents per barrel to $78.77.
The U.S. dollar fell to 138.36 Japanese yen from 138.71 yen in currency trading. The price of the euro increased to $1.1252 from $1.1240.