(Jan 16): Asia’s tech-led rally pushed to new highs after strong earnings from a chip bellwether eased worries about overheating in the artificial intelligence (AI) sector and encouraged investors to add bets.
The MSCI Asia-Pacific Index climbed 0.3% on Friday to a new record and was set for a fourth weekly gain. A regional gauge of technology shares and South Korea’s benchmark index — a poster-child for the AI theme — also hit all-time highs as Taiwan Semiconductor Manufacturing Co (TSMC) climbed to its highest ever after blowout earnings.
TSMC’s earnings rekindled enthusiasm for stocks, helping US equities rebound from their first back-to-back losses of the year. That optimism looked set to continue with futures for the S&P 500 and the Nasdaq 100 rising 0.2%. Elsewhere oil steadied after its biggest decline since June, while gold and silver edged lower.
Stocks are extending gains as investors regain confidence in the durability of the tech rally, a key bull-market driver, after concerns over stretched valuations and heavy investment. Earnings from TSMC also helped ease worries about the sustainability of data-centre spending following a recent pullback in richly valued technology shares.
“Technology stocks had looked vulnerable in recent weeks as investors rotated away from megacap names and into more cyclical areas of the market,” said Fawad Razaqzada at Forex.com. “TSMC’s update, though, appears to have stabilised that ‘rotation’ rather than reversed it outright.”
See also: Asian stocks fall as tech sell-off gains momentum
A run of stronger-than-expected US economic data has helped shape a growing sense that market conditions are improving, with investors chasing riskier parts of the market that typically benefit in that scenario.
In other corners of the market, Treasuries were little changed in Asia after falling in US trading when jobless claims unexpectedly dropped to the lowest since November.
The 10-year’s yield is headed for a fifth straight week of minimal change, rivalling its longest stretch of inertia in the past two decades.
See also: Asian stocks pare losses after US tech-led sell-off
The trend — a function primarily of expected stability in US monetary policy — is stoking anxiety among bond-market investors because previous instances of constricted yield ranges have been followed by sell-offs.
Traders will also be watching the rising tensions in the Middle East after Fox News reported that at least one US aircraft carrier is moving to the region. US military planners are preparing a range of options depending on the actions of the Iranian government in the next few days, Fox reported.
Separately, the US and Taiwan agreed to a long-sought trade pact that would lower tariffs on goods from the self-governed island to 15% and see Taiwanese semiconductor companies increase financing for American operations by US$500 billion ($643.94 billion).
In Asia, focus is also on Japan, where central bank officials are closely watching the yen’s potential influence on inflation, with possible implications for future rate hikes after a likely 'hold' decision next week.
Traders are also parsing capital flows in and out of Japan on Friday as the yen inches towards the 160-per-dollar mark. Official intervention to strengthen the currency is a topic of discussion among market participants as the yen trades near a one-and-a-half year low.
“We have obviously previously seen Japan intervene above the 160 level and as we get closer to that, I think that becomes a possibility,” said Divya Devesh, a co-head of foreign exchange research for Asean and South Asia at Standard Chartered. “It is an unstable equilibrium,” he said of Japan’s macro backdrop.
Corporate highlights:
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- Goldman Sachs Group Inc blew through expectations for equities-trading revenue, posting an all-time Wall Street record of US$4.31 billion in the final three months of last year.
- Morgan Stanley’s debt bankers increased revenue 93% in the fourth quarter, by far the biggest jump on Wall Street and capping a record year for that business.
- BlackRock Inc pulled in US$342 billion of total client cash in the fourth quarter, pushing the firm to a record US$14 trillion of assets as it integrates a string of recent acquisitions to become a force in private markets.
- Goldman Sachs is set to raise US$16 billion with the largest investment-grade bond sale ever from a Wall Street bank.
Some of the main moves in markets:
Stocks
- S&P 500 futures had risen 0.2% as of 10.45am Tokyo time on Friday
- Japan’s Topix fell 0.3%
- Australia’s S&P/ASX 200 rose 0.3%
- Hong Kong’s Hang Seng rose 0.5%
- The Shanghai Composite rose 0.5%
- Euro Stoxx 50 futures fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1607
- The Japanese yen was little changed at 158.53 per dollar
- The offshore yuan was little changed at 6.9634 per dollar
Cryptocurrencies
- Bitcoin was little changed at US$95,616.64
- Ether rose 0.4% to US$3,312.37
Bonds
- The yield on 10-year Treasuries was little changed at 4.16%
- Japan’s 10-year yield advanced 1.5 basis points to 2.175%
- Australia’s 10-year yield advanced two basis points to 4.70%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold fell 0.2% to US$4,605.44 an ounce
Uploaded by Tham Yek Lee
