SINGAPORE: Asian equities plummeted on Thursday, hurt by tech shares’ poor profit projections from the parent company of Facebook, Meta Platforms, and the possibility of Tokyo intervening was elevated by the yen’s decline past 155 / dollar for the primary time since 1990.
Extended trading saw a 15% decline in Meta shares as the parent company of Instagram reported lower-than-expected revenue for the current quarter and increased expenses, which soured investor sentiment and sparked a sell-off in US tech and internet-related firms.
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The broadest MSCI index of shares from Asia-Pacific that excludes Japan fell 0.7% due to the expected decline in Asian tech firms.
Japan’s Nikkei sank 1.3%, while China’s equities also declined, with Hong Kong’s Hang Seng Index down 0.5% and the blue-chip CSI300 index down 0.3%.
Tech bellwethers Alphabet, Microsoft, and Intel are set to release their quarterly results later on Thursday, making it an exciting week full of earnings releases.
“If Meta serves as a benchmark, it appears that the market is intolerant of inline – following a strong Q1 and Q2 run, you either blow it out of the water or the market extracts its share of the pain,” stated Chris Weston, Pepperstone’s head of research.
Following Tesla’s announcement on Wednesday that it will launch “new models” by early 2025 utilizing its current infrastructure and manufacturing lines, tech stocks saw a spike.
Apart from company results, investors’ attention will be focused on the U.S. GDP statistics for the first quarter on Thursday and the Fed’s favorite inflation indicator, personal consumption expenditures, for March on Friday.
The CME FedWatch Tool indicated that markets are pricing in a 70% possibility of September as the starting point for rate reductions by the Fed, which has pushed back expectations following a hotter-than-expected inflation of consumer prices report for March.
In contrast to the 150 percentage points that traders had predicted at the beginning of the year, they now pricing in 43 percentage factors for relaxation in 2024.
With the dollar and Treasury yields rising due to changing expectations about U.S. rates, the currency market has been negatively impacted. At 105.75, the dollar showed minimal movement in relation to a group of currencies. This year, the index is risen more than 4%.
The weakest performing G10 currency this year, the yen has suffered from the dollar’s rise and is down 9%. The yen is susceptible to U.S. Treasury yields.
The yen was trading at 155.445 to the dollar on Thursday after hitting a 34-year low of 155.45 before in the day. This move broke through the crucial 155 yen mark, which some traders had identified as the tipping point beyond which Tokyo might intervene.
The Bank of Japan (BOJ) is expected to maintain its short-term rate of interest target as it begins its two-day rate-setting session on Thursday to review monetary policy.
However, the focus will be on the Bank of Japan Governor Kazuo Ueda’s remarks as he attempts to keep the currency stable while maintaining a measured path out of ultra-easy rates.
In 2022, Tokyo had to intervene and pay a total of approximately $60 billion to protect the yen after his predecessor’s dovish words caused a sharp decline in the value of the yen. Tokyo will be careful to avoid a repeat of that scenario.
The dollar/yen pair appears to be trading approximately in accordance with relative interest rate spreads, which suggests the Ministry of Finance would be facing significant challenges, according to Kieran Williams, head of Asia FX at InTouch Capital Markets.
“If the USD/JPY continues to rise following the BOJ, authorities may decide to intervene, particularly in light of Finance Minister Suzuki’s suggestion that the conditions were set for intervention.”
Takao Ochi, a party executive, told Reuters that although the yen’s decline to 160 against the dollar may prompt policymakers to take action, the governing party of Japan is not currently debating at what point it would be appropriate to intervene in the market.
anxieties about a possible slowdown in the US economy outweighed anxieties about the possibility of a Middle East conflict spreading, which led to a little easing of oil prices in the commodities market.
U.S. crude dropped 0.08% to $82.74 a barrel, while Brent saw a daily decline of 0.03% to $87.99. An ounce of spot gold increased by 0.2% to $2,320.32.
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