Asian equities faced a downturn on Tuesday following the revelation of a contraction in U.S. manufacturing during May, underscoring concerns about the deceleration of the economy.
Oil prices experienced a decline, while U.S. futures displayed a modest uptick.
Japan’s Nikkei 225 index exhibited a 0.5% drop to 38,749.25, accompanied by Seoul’s Kospi, which retreated by 0.4% to 2,672.43. Contrary to the trend, Hong Kong’s Hang Seng saw a marginal gain of 0.1% to reach 18,413.20, whereas the Shanghai Composite index dipped by 0.1% to settle at 3,075.09.
The S&P/ASX 200 in Australia slid by 0.1% to 7,751.50, and Taiwan’s Taiex incurred a loss of 0.7%.
On Monday, U.S. stocks concluded the session with a mixed performance.
The S&P 500 managed a slight uptick of 0.1% to reach 5,283.40, despite a majority of constituent stocks experiencing declines. The Dow Jones Industrial Average fell by 0.3% to 38,571.03, while the Nasdaq composite surged by 0.6% to 16,828.67.
Following the report by the Institute for Supply Management indicating the contraction of U.S. manufacturing in May, Treasury yields experienced a decline in the bond market. This marks the 18th time in 19 months that manufacturing activity has shrunk, largely attributed to elevated interest rates aimed at curbing high inflation, which also poses risks to Asian economies reliant on exports.
Analysts raised questions regarding the significance of the report, noting its consistent decline over the past two years.
Tan Jing Yi of Mizuho Bank commented, “So, why such a distinct wave of U.S. pessimism this time? Was it a manufactured excuse to take profits? Or is there a deeper cause for concern beneath the hood? We suspect it is a bit of both.”
The yield on the 10-year Treasury fell to 4.39% from 4.50% late Friday.
The week ahead features several significant economic reports that could trigger substantial movements in yields.
Tuesday will see the U.S. government’s release of data on job openings advertised by employers at the end of April. Friday will bring the latest monthly update on overall job growth and workers’ wages.
Stocks closely linked to economic strength experienced notable declines, including companies in the oil-and-gas sector, as crude oil prices plummeted due to concerns over weakened demand growth for fuel.
Halliburton witnessed a 5.3% drop, and Exxon Mobil declined by 2.4%. The price of U.S. oil per barrel fell by 3.5%, while Brent crude, the international benchmark, experienced a similar decrease despite efforts over the weekend by oil-producing countries such as Saudi Arabia to stabilize prices.
Conversely, certain prominent technology stocks continued their ascent regardless of economic indicators.
Nvidia surged by 4.9%, bringing its year-to-date gain to 132.2% after introducing new products and services over the weekend. Its robust performance has helped buoy the S&P 500 significantly.
Meanwhile, GameStop, known for its volatile swings, soared by 21%, reminiscent of its dramatic ascent in early 2021. The surge followed a Reddit post claiming a stake of 5 million shares in the company, valued at $181.4 million.
The term “meme stock” has gained traction to describe companies whose stock prices are influenced more by retail investors’ enthusiasm than by fundamental business changes. AMC Entertainment also saw an 11.1% increase on Monday.
In other market movements, U.S. benchmark crude oil traded at $73.70 per barrel in electronic trading on the New York Mercantile Exchange, marking a decline of 52 cents, while Brent crude dropped by 48 cents to $77.88 per barrel.
The U.S. dollar strengthened against the Japanese yen to 156.38 from 156.10 yen, while the euro climbed to $1.0908 from $1.0904.
