HONG KONG: Asian markets opened mostly down on Wednesday following a tepid lead from Wall Street, with traders trying to assess the Federal Reserve’s next moves in the fight against inflation.
The more or less flat results in New York left some looking for direction, with global investors scrutinising mixed earnings reports for major US lenders.
But receding fears of a banking crisis coupled with optimism for a recovery in the world’s second-biggest economy were still not enough to give a meaningful boost to sentiment.
“There’s not a lot of volatility because I think there’s not enough evidence of a full-blown recession, nor is there evidence of a full-blown growth track out there,” Michael Cuggino, president and portfolio manager of San Francisco-based Permanent Portfolio Family of Funds, told Bloomberg Radio.
On Wall Street, Bank of America rose on higher profits but Goldman Sachs was hit by a slowdown in corporate mergers.
Investors were also keeping an eye on the results of regional US banks after three collapsed last month as lenders faced pressure from rising interest rates.
The outlook was also mixed on whether the Fed was reaching the end of its inflation-fighting cycle of rate hikes, with some analysts warning that certain investors’ apparent confidence in coming cuts was misplaced.
Fed officials also seemed split on the way forward, with Atlanta bank boss Raphael Bostic happy for one more hike before holding rates for some time above five percent but St. Louis counterpart James Bullard looking at taking them to as high as 5.5-5.75 percent.
Borrowing costs are currently at 4.75-5 percent.
Investors are also weighing the outlook for the Chinese economy, with data Tuesday showing it expanded a forecast-busting 4.5 percent expansion in January-March, the first quarter it has been unencumbered by growth-sapping zero-Covid restrictions.
Asian stocks trim losses as China beats GDP forecasts
The jump was helped by a surge in retail sales in March, but while the readings were healthy, other figures on industrial output and fixed-asset investment came in below par, pointing to an uneven recovery, and weighing on most Asian markets Tuesday.
The Chinese economy is also dealing with other issues, including a debt-laden property sector, global inflation and the threat of recession elsewhere.
“The market has been very biased to discount good news in China, but we think the improvement, mainly if inflation picks up, will become harder to ignore over the coming months,” Stephen Innes of SPI Asset Management said in a note.
Investors “expect Chinese activity data to improve further in the next couple of months, given a continued reopening impulse, still-accommodative macro policies and a low base from the second quarter of 2022” when Shanghai was in lockdown, he added.
Key figures around 0250 GMT
Tokyo - Nikkei 225: DOWN 0.2 percent at 28,590.40 (break)
Hong Kong - Hang Seng Index: DOWN 1.1 percent at 20,433.72
Shanghai - Composite: DOWN 0.3 percent at 3,382.71
Euro/dollar: DOWN at $1.0968 from $1.0975 on Tuesday
Pound/dollar: DOWN at $1.2414 from $1.2425
Dollar/yen: UP at 134.34 yen from 134.10 yen
Euro/pound: UP at 88.36 pence from 88.26 pence
West Texas Intermediate: FLAT at $80.85 per barrel
New York - Dow: FLAT at 33,976.63 (close)
London - FTSE 100: UP 0.4 percent at 7,909.44 (close)