Asian stock markets faced widespread declines on Tuesday as a result of disappointing business activity data from Japan and Australia. However, the Chinese markets managed to rebound from pre-pandemic lows, thanks to a state-run fund’s intervention.
Market Overview
Weak business sentiment, attributed in part to ongoing concerns regarding the Israel-Hamas conflict, limited any significant gains across Asian markets. While diplomatic efforts have shown some signs of progress, missile attacks between Israel and Gaza persisted. Moreover, there were apprehensions about a potential Israeli ground assault on Gaza, which could escalate the conflict further.
The recent easing of Treasury yields, which had previously reached multi-year highs earlier in the month, provided some support to the stock markets. However, the technology sector remained under pressure.
Weak PMIs in Japan and Australia Impact Sentiment
Japan’s Nikkei 225 index declined by 0.4%, and the TOPIX fell by 1% after the release of purchasing managers’ index (PMI) data, indicating that Japanese manufacturing activity contracted more than anticipated in October. Additionally, growth in the services sector deteriorated, underlining persistent economic weakness in Asia’s second-largest economy, which is grappling with rising inflation.
Australia’s ASX 200, on the other hand, managed to rise by 0.1%, reversing initial losses and rebounding in line with Chinese stocks. Nevertheless, PMI data revealed that both Australian manufacturing and services activity remained in contraction during October.
China’s Market Rebounds with State Support
The Chinese markets made a notable recovery. The Shanghai Shenzhen CSI 300 index rose by 0.4%, regaining ground from its lowest level since January 2019, while the Shanghai Composite added 0.7%, bouncing back from an 11-month low.
Central Huijin Investment Co., a Chinese sovereign fund, announced its purchase of some exchange-traded funds (ETFs) this week to provide support to the local stock markets. The fund also signaled its intent to increase its local ETF holdings, indicating a show of support for Chinese stocks. These actions came as Chinese stocks were battered by concerns over a property market crisis and a sluggish economic recovery.
Tech Sector Under Pressure from High Yields and Earnings Anticipation
The technology-heavy indexes in the Asian markets were the day’s weakest performers, facing continued pressure from high yields. Traders were also cautious ahead of several key U.S. tech earnings reports, including those from Microsoft Corporation (NASDAQ: MSFT), Alphabet (NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), Intel Corporation (NASDAQ: INTC), and Amazon (NASDAQ: AMZN) later in the week. These reports will reveal whether the steady earnings growth observed earlier this year continued through the third quarter.
While yields retreated slightly this week, they remained close to multi-year highs as markets prepared for higher and more sustained U.S. interest rates.
Regional Market Movements
Hong Kong’s Hang Seng index shed 0.5%, recovering from an 11-month low earlier in the session but still weighed down by losses in heavyweight technology stocks.
South Korea’s KOSPI fell by 0.2%, while the Taiwan Weighted index sank by 0.8%. Taiwan shares were additionally rattled by reports of China opening a tax probe into Apple Inc (NASDAQ: AAPL) supplier Foxconn Technology Co Ltd (TW: 2354).
Please note that the financial market situation is subject to change, and investors are advised to make informed decisions based on the most current information available.
