Asian Stocks Up, Focus Now on “Profits and Fed” as Chinese, HK Shares Stabilize

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Investing.com – Asia Pacific stocks were mostly up on Tuesday morning, making modest gains as the session opened. Chinese and Hong Kong shares stabilized from their steep losses during the previous day, while their U.S. counterparts closed the previous session with a fresh record.

Japan’s Nikkei 225 were up 0.53% by 10:16 PM ET (2:16 AM GMT) and South Korea’s KOSPI gained 0.71%. Korea’s GDP grew 5.9% year-on-year and 0.7% quarter-on-quarter in the second quarter of 2021, according to data released earlier in the day.

In Australia, the ASX 200 was up 0.45%.

Hong Kong’s Hang Seng Index fell 0.66%. China’s Shanghai Composite was down 0.22% while the ShenzhenComponent was up 0.48%.

U.S. shares closed at a fresh record as Tesla Inc. (NASDAQ:TSLA) became the latest company to report its results, which were better than expected. Alphabet Inc. (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL), Facebook Inc . (NASDAQ:FB) and Amazon.com Inc. (NASDAQ:AMZN) are among the companies to report their earnings later in the week.

U.S. Treasuries steadied, with the real yield on the benchmark 10-year debt tumbling to a record low as the U.S. Federal Reserve prepares to hand down its latest policy decision. Officials are expected to discuss an eventual asset tapering in their two-day meeting, which starts later in the day, ahead of handing the decision down on Wednesday.

“It’s profits and the Fed. The next couple of days are going to be monumental as everyone tries to figure out how strong corporate fundamentals are at the moment and in what context that is happening in terms of the economic outlook and policy settings,” IG Markets market analyst Kyle Rodda told Reuters.

Meanwhile, the Nasdaq Golden Dragon China Index that tracks 98 of China’s biggest firms listed in the U.S. recorded its biggest two-day drop since 2008. The impact of the Chinese clampdown on sectors including technology, education and real estate continue to felt as the country tightens its grip on the economy. With investors left wondering which sectors could be next, the resultant selloff in Chinese shares will increase the probability of wider risk aversion.

However, strong corporate profits and the uneven but steady COVID-19 recovery in the most-vaccinated nations continued to brighten the overall outlook. spread of COVID-19 cases involving the Delta variant remains a concern and that the economic recovery from COVID-19 could be peaking.

The Fed meeting and policy decision could also provide clues as to how inflationary pressures will shape the monetary policy outlook.

“Equity markets have oscillated between inflation and growth fears, which should not coexist,” Natixis Investment Managers Solutions head of global market strategy Esty Dwek said in a note. Although “growth will hold up, the reopening will last and the Fed will err on the side of caution and maintain its accommodative stance,” volatility also lies ahead, the note added.

Also on investors’ radars is U.S. second-quarter GDP data, due on Thursday.

Volatility also continued in cryptocurrencies, with Bitcoin topping the $40,000 mark before paring those gains to trade above $37,000.