Asian stocks are poised for further gains on Tuesday, following a positive start to the week both locally and globally. The recovery in tech shares, calmness in fixed income markets, and easing geopolitical tensions have boosted market sentiment.
Tuesday’s economic calendar is packed with data releases, including purchasing managers index reports from Japan, Australia, and India; consumer inflation data from Singapore and Hong Kong; producer inflation figures from South Korea; and industrial production numbers from Taiwan.
Currency traders are closely monitoring the yen’s movements, with the dollar approaching the 155.00 yen mark. Intervention by the Bank of Japan remains a possibility, but its proximity to the central bank’s two-day policy meeting starting Thursday raises questions. China’s yuan remains under pressure, slipping to a five-month low against the dollar on Monday.
Overall, market sentiment is positive after the rebound in the S&P 500 and Nasdaq on Monday, supported by the tech sector’s recovery. Investors are now looking ahead to earnings reports from tech giants such as Tesla, Meta Platforms, Alphabet, and Microsoft this week, which will provide key insights into the outlook for U.S. and global stocks.
The ‘FANG’ index of mega U.S. tech stocks snapped a six-day losing streak on Monday, regaining some of the losses incurred last week. Analysts estimate that the ‘Magnificent Seven’ (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla) lost $1.1 trillion in market cap during that period.
Shares in Taiwan Semiconductor Manufacturing Co (TSMC) will be watched closely after declining 1% on Monday, following a 6% slide on Friday after its first-quarter results. Official figures from Taipei showed weaker-than-expected export orders in March, but the government remains optimistic about the future demand for the island’s high-tech products.
However, a note of caution remains as financial conditions tighten, driven by rising long and short rates. The key question is how far bond yields will continue to climb. The two- and 10-year U.S. Treasury yields have both surged almost 100 basis points from recent lows, with the two-year yield approaching the 5.00% mark, which many investors consider an attractive buying point. A stabilization in yields could reduce bond volatility, which in turn could help ease volatility in other markets. Implied U.S. equity volatility, which hit a six-month high on Friday, posted its biggest fall in six months on Monday, offering some relief but potentially only temporary.
