European stocks were expected to see modest gains as traders awaited Nvidia Corp.’s earnings report, which is anticipated to offer insights into the growth trajectory of artificial intelligence-related stocks. Euro Stoxx 50 futures were up 0.1%, suggesting a subdued start for European shares, while US stock futures remained largely unchanged during Asian trading hours.
In contrast, Asian equities traded in narrow ranges amid disappointing corporate earnings from China. Stocks in Hong Kong fell as much as 1.6%, and mainland Chinese stocks reached their lowest point since early February. Shares of Nongfu Spring Co., a major bottled water manufacturer, plunged by up to 13% following its announcement of the slowest half-year profit growth in four years.
Winnie Wu, a China equity strategist at Bank of America Corp., highlighted that downgrades are currently outpacing upgrades in Chinese earnings. “Internet companies are outperforming others in meeting earnings expectations, but sectors such as materials, technology, construction, and automotive face significant risks,” Wu told Bloomberg TV.
Major Asian benchmarks, including those in South Korea and Hong Kong, were predominantly lower. Two-year Treasury yields, which are sensitive to interest rate changes, fell by three basis points.
Weak sentiment towards China reemerged after PDD Holdings Inc., an e-commerce firm, provided a sluggish outlook. This negative sentiment was echoed by other companies, including ANTA Sports Products Ltd., which reduced its full-year sales forecast for one of its core brands due to expected discounting pressures. Australia’s Fortescue Ltd. also reported a full-year profit that fell short of analyst expectations, partly due to a slowdown in iron ore demand from China.
Upcoming earnings reports from Cnooc Ltd., BYD Co., and Meituan are anticipated on Wednesday. In the US, investors are keenly awaiting Nvidia’s results, which will be scrutinized for indications of continued momentum in the AI sector. Jun Rong Yeap, a market strategist at IG Asia Pte., noted that Nvidia’s earnings could significantly impact global markets, given the high levels of optimism surrounding AI stocks.
The Japanese yen extended its losses by 0.4% against the dollar following comments from Bank of Japan Deputy Governor Ryozo Himino. Himino stated that the BOJ would consider raising interest rates if inflation aligns with its projections, while maintaining “utmost vigilance” on economic developments.
In corporate news, Seven & I Holdings Co. saw its shares slip after it sought a national security-related designation, which could complicate a potential takeover by Alimentation Couche-Tard Inc., which had approached the company last week. Additionally, Japan issued its highest emergency alert as Typhoon Shanshan approached the southern island of Kyushu.
In other developments, HSBC Holdings Plc’s shares outperformed the benchmark in Hong Kong following reports that the bank is considering restructuring to reduce middle management layers. Warren Buffett’s Berkshire Hathaway Inc. sold an additional $982 million worth of Bank of America shares, according to a regulatory filing.
In the cryptocurrency market, Bitcoin fell below the $60,000 mark early Wednesday amid a broader retreat in crypto assets, including a sharp decline in Ether, the second-largest cryptocurrency.
Oil prices stabilized after a decline in the previous session, ending a three-day rally, while gold retreated following a three-day advance that brought it closer to its all-time high.
Investors are bracing for significant volatility in Nvidia’s shares following its earnings report. Options trading implies a nearly 10% price movement in either direction after the results are announced. Nvidia’s stock has surged about 160% this year and 1,000% since its October 2022 low, with analysts predicting revenue growth of over 70% for the current quarter. The company’s results and outlook will serve as a key indicator of AI investment trends across the technology sector.
