Asia markets extend gains on rate cut optimism; RBA decision in focus

Lim Hui Jie

Asia-Pacific markets climbed on Tuesday, extending gains from the previous session, as Wall Street rose overnight on expectations that the Federal Reserve will cut interest rates.

In Asia, investors await the Reserve Bank of Australia decision on rates as the bank concludes its two-day monetary policy meeting. Economists polled by Reuters expect the RBA to hold its benchmark lending rate at 4.35% for its fourth meeting in a row.

Australia’s S&P/ASX 200 was up 0.38% ahead of the decision, on course to gain for a fourth straight day.

South Korea’s Kospi popped 1.8% to hit a one-month high as trading resumed after a public holiday. The small-cap Kosdaq rose 0.61%.

Japan’s Nikkei 225 also resumed trading after a holiday to rise 1%, while the broad-based Topix gained 0.19%.

Hong Kong’s Hang Seng index edged 0.31% higher, while mainland China’s CSI 300 was flat.

Overnight in the U.S., an announcement from Hamas on Monday that it had accepted an Egyptian-Qatari cease-fire proposal to end the war with Israel also gave stocks a boost, with the Dow Jones Industrial Average notching a fourth consecutive winning session, up 0.46%.

The S&P 500 advanced 1.03%, while the Nasdaq Composite gained 1.19%.

— CNBC’s Brian Evans and Jesse Pound contributed to this report.

Australia retail sales fall 0.4% in March quarter, declining for fifth time in six quarters

Retail sales volumes in Australia fell 0.4% on a seasonally adjusted basis in the March quarter compared with the previous three months, according to government data.

The reading comes after a 0.4% rise in the December quarter. On a year-on-year basis, retail sales volumes were down 1.3% in the March quarter.

“Retail sales volumes fell for the fifth time in the past six quarters as consumers cut back on buying large household items such as furniture and electronic goods,” said Ben Dorber, head of retail statistics at the Australian Bureau of Statistics.

“The only rise in volumes over the past 18 months was the December quarter last year as extensive discounting from Black Friday sales boosted volumes,” Dorber added.

— Shreyashi Sanyal

Japan’s April business activity rises at fastest pace in eight months

Japan’s service sector activity expanded in April at its fastest pace since August, according to final figures from S&P Global.

The headline au Jibun Bank Japan services business activity index came in at 54.3 in April, compared to 54.1 in March, touching an eight month high.

A figure above 50 signifies expansion.

“Rising business activity has been recorded in each month since September 2022, with the latest expansion reflecting stronger business and consumer spending,” the S&P survey said.

— Shreyashi Sanyal

Philippines inflation quickens for third straight month to 3.8%

Inflation in the Philippines accelerated for a third straight month in April, with the headline inflation rate coming in at 3.8% compared to March’s figure of 3.7%.

However, the 3.8% figure was lower than economist forecasts of 4.1%. The country’s statistics authority said the rise in inflation was mainly due to increases in the prices of food and non-alcoholic beverages, as well as transport.

The core inflation rate, which strips out selected food and energy items, dropped slightly to 3.2% from 3.4%, lower than economist expectations of 3.3%.

— Lim Hui Jie

Japan’s Nippon Steel gets EU approval for $14.9 billion deal to buy U.S. Steel

The European Union approved a $14.9 billion deal for Japan’s Nippon Steel to buy U.S. Steel late on Monday.

Shares of Nippon Steel fell 0.26% in early Tokyo trading, while U.S. Steel shares jumped 4.3% in after-hours U.S. trading on Monday.

“The Commission concluded that the notified transaction would not raise competition concerns, given the companies’ limited market positions resulting from the proposed transaction,” the European Commission said in a statement.

Nippon Steel said it would buy U.S. Steel in December after prevailing in an auction over rivals including Cleveland-Cliffs and ArcelorMittal.

— Shreyashi Sanyal

Japan may take action over ‘rapid’ currency moves, top currency diplomat says: Reuters

Japan may have to take “appropriate action” in the event that “disorderly foreign exchange moves driven by speculation” affect the yen, according to top currency diplomat Masato Kanda.

“It is preferable for exchange rates to remain in a stable manner following fundamentals, and if the market is functioning soundly in this way, there is of course no need for the government to intervene,” Kanda said, according to Reuters.

He also denied to comment when asked for official confirmation that Japanese authorities had intervened in the currency.

Last week, Tokyo is suspected of having spent more than 9 trillion yen ($58.4 billion) in two rounds of interventions, strengthening the yen from a 34-year low of 160.03 to as high as 151.86 against the U.S. dollar.

— Lim Hui Jie, Reuters

CNBC Pro: Will China’s comeback stock rally last? Wall Street weighs in and shares stock picks

China stocks have staged such a strong rally after a protracted slump for the past few years that they’re beating even the S&P 500 so far this year.

That breakout has come after a deep and lengthy decline in Chinese markets, as they lost nearly $5 trillion in three years. Investors were bearish as a result of the property debt crisis, slowing growth and other factors.

But is the bounce back sustainable? Here’s what Wall Street and other analysts say, and what to buy in the market.

— Weizhen Tan

CNBC Pro: After a tough quarter for global luxury, Barclays reveals its top 3 stocks to play the sector right now

Macroeconomic uncertainties may have pushed consumers – particularly those from China – to tighten their purse strings and reduce spending on luxury goods. However, Barclays notes that several companies in the sector make good plays right now.

While Chinese consumers’ spending intentions for the ongoing quarter shows that they plan to spend more money on luxury, the investment bank’s analysts “remain cautious about the possibility of seeing improving trends.”

Still, expenditure on luxury goods is expected to 68% this year, up from 66% in 2023, they wrote, revealing the three names the like.

— Amala Balakrishner

‘Magnificent Seven’ fueling all the earnings growth in the S&P 500

More than three-quarters of the way through earnings season, and it is another strong showing for the “Magnificent Seven.” Of the six that have already reported, only Tesla has missed estimates.

According to earnings data provider LSEG, aggregate earnings for the Magnificent Seven are expected to soar 49% year over year. In contrast, the other 493 S&P 500 stocks are on pace to see just flat earnings growth this season, up 0.4%.

The Magnificent Seven’s strong growth has been fueled by particularly robust performance from Meta Platforms, Alphabet and Amazon over the past couple of weeks.

But no stock will have more of an effect than Nvidia, which reports results on May 22. The chipmaker’s earnings are expected to surge more than five times last year’s levels. Nvidia alone is expected to make up more than one-third of the 7% earnings growth the entire S&P 500 is now seeing this season.

— Robert Hum

Platinum may have relative value against gold, Deutsche Bank says

Some investors may have sniffed out a buy-the-dip opportunity in precious metals, according to Deutsche Bank.

Analyst Michael Hsueh said in a note to clients Monday that platinum funds have seen a recent uptick in inflows after platinum prices have drifted well below that of gold.

“Platinum is one step closer to gold compared with palladium from an investment standpoint. One piece of the argument may depend on a relative value rationale versus gold; XPTXAU reached a new record low in April,” Hsueh said.

The Abrdn Physical Platinum Shares ETF (PPLT) has seen about $34 million in flows over the past month, according to FactSet. Its price has fallen 3.9% this year, compared to a gain of 11.4% for SPDR Gold Shares (GLD).

— Jesse Pound

Don’t ignore China momentum, says Strategas

Strategas’ sentiment toward the China market has made a marked pivot from “no way” last year, to “this may be more of a strategic turn,” according to Strategas’ head of macro research and technical strategy Chris Verrone.

“Time will reveal all, but the big momentum in the China indices is not to be ignored and is spilling to the EEM which has been among the first of the bellwether global indices to break out (along with the U.K. FTSE 100),” Verrone said in a Monday note.

An upturn in China could further strengthen the bull case for industrial metals, particularly copper, Verrone added.

The benchmark Shanghai Shenzhen CSI 300 Index is up around 1.5% in May.

— Hakyung Kim

Source : cnbc