In the Asian markets on Monday, there was a mix of results for shares, as Hong Kong’s benchmark experienced a decline of 2.2%. This drop came after reports indicated that China’s leaders are not planning significant stimulus measures to boost their slowing economy, which is the second-largest in the world.
Meanwhile, U.S. futures showed a slight decline, and oil prices also experienced a fall.
Anticipation is high that the Federal Reserve will raise its federal funds rate on Wednesday, potentially reaching its highest level since 2001. Investors are hopeful that this might mark the end of the tightening cycle, as inflation has been cooling down since the previous summer. It’s worth noting that the federal funds rate began 2022 at nearly zero.
Amidst hope for additional support to revive the slowing economy, a crucial meeting of the powerful Politburo in the ruling Communist Party is scheduled for later this week. However, recent reports suggest that significant stimulus measures are unlikely. Nevertheless, the country’s economic planning agency, the National Development and Reform Commission, unveiled detailed measures on Monday aimed at promoting private investment. The official Xinhua News Agency reported that the agency plans to encourage private investment in industries with high market potential that align with national strategies and industrial policies. These sectors include transport, water conservancy, clean energy, new infrastructure, advanced manufacturing, and modern facility agriculture.
In Japan, the Bank of Japan will also convene a policy meeting this week, but no major changes to the country’s ultra-lax monetary stance are anticipated.
As for the Asian markets on Monday, Tokyo’s Nikkei 225 index saw a rise of 1.2% to 32,700.94, while Hong Kong’s Hang Seng index dropped more than 400 points to 18,642.40. The Shanghai Composite index slipped 0.1% to 3,164.16, the Kospi in Seoul gained 0.7% to 2,628.53, and Australia’s S&P/ASX 200 shed 0.1% to 7,306.40. In Bangkok, the SET index picked up 0.1%, while India’s Sensex lost 0.2%.
On Friday, the stock market on Wall Street showed signs of stabilization following a previous day’s decline.
The ongoing earnings reporting season has been gaining momentum, with a majority of companies announcing better-than-expected results.
The S&P 500 experienced a slight increase of 0.1%, reaching 4,536.34, which marked its eighth winning week out of the last 10. The Dow Jones Industrial Average saw a marginal gain of less than 0.1%, closing at 35,227.69, securing its 10th consecutive gain. However, the Nasdaq composite slipped 0.2% to 14,032.81, a day after suffering its most significant loss in over four months.
Throughout this year, the stock market has exhibited strong performance, with the benchmark S&P 500 rising by 18.1%. Despite concerns of a possible recession, the economy has defied expectations. The market has even withstood higher interest rates aimed at curbing inflation, and there is hope that it may continue to weather the Federal Reserve’s rate-hike campaign.
The Federal Reserve is widely anticipated to increase its federal funds rate on Wednesday to the highest level since 2001. However, there is optimism that this might be the final increase in the cycle, given the cooling inflation since last summer. It’s worth noting that the federal funds rate began last year at nearly zero.
In the upcoming week, three of the “Magnificent Seven” companies that have been major contributors to the S&P 500’s gains this year, namely Alphabet, Facebook’s parent company Meta Platforms, and Microsoft, are set to report their earnings. Expectations are high for their performance, as all three companies have already surged more than 35% this year.
The dominance and influence of the top stocks in the market have reached such heights that Nasdaq decided to rebalance its Nasdaq 100 index before Monday’s trading session. This move is aimed at reducing the impact these stocks have on the overall index.
Among the top stocks are seven major companies, including Alphabet (Google), Facebook’s parent company Meta Platforms, Amazon, Apple, and Nvidia. Collectively, these companies have stock prices that are 44 times higher than their earnings per share over the last 12 months, according to Savita Subramanian, an equity strategist at Bank of America.
In other trading on Monday, the price of U.S. benchmark crude oil declined by 37 cents to $76.72 per barrel in electronic trading on the New York Mercantile Exchange. On Friday, it had risen by $1.42 to reach $77.07 per barrel.
Similarly, Brent crude, which serves as the pricing basis for international trading, also experienced a decline of 37 cents, bringing its price to $80.70 per barrel.
As for currency markets, the dollar weakened against the Japanese yen, falling to 141.39 yen from 141.68 yen. Conversely, the euro strengthened against the dollar, rising to $1.1146 from $1.1128.