Asia Stocks Rise on Encouraging Profits & Hope for Chinese Stimulus
Shares in Asia have mostly risen amid optimistic profit reports and the expectation of additional stimulus measures from Beijing. Wall Street’s climb, driven by more positive earnings and indications of easing inflation, has also boosted sentiment. Chinese factory activity contracted in July, emphasizing the need for economic support to prevent a recession. The Hang Seng in Hong Kong increased by 1.5%, and the Shanghai Composite index advanced by 0.6%. Tokyo’s Nikkei 225 rose by 1.1%, and the Kospi in Seoul climbed by 0.7%. However, Australia’s S&P/ASX 200 edged 0.1% lower, while the SET in Bangkok was up by 0.6%. The Sensex in India remained relatively unchanged.
The recent rise in stock prices is underpinned by hopes that higher inflation may be cooling enough for the Federal Reserve to halt interest rate hikes. This could support continued economic growth and potentially avoid a recession. A report indicating a slowdown in the Fed’s preferred inflation measure last month, coupled with lower-than-expected worker compensation, has bolstered these hopes. The anticipated halt to interest rate hikes has particularly benefited technology stocks and other sectors that stand to gain from easier rates.
The positive trend in stock prices is further supported by companies reporting stronger-than-anticipated profits for the spring season, with many surpassing analysts’ forecasts. Notably, Intel experienced a 6.6% increase in its stock price after reporting a profit when analysts had projected a loss. Food giant Mondelez International also exceeded expectations, leading to a 3.7% increase in its stock price. The company revised its financial forecasts for the full year upwards.
Additionally, hopes have been revived for more stimulus from Beijing to tackle the sluggish Chinese economy. Chinese factory activity contracted in July, with shrinking export orders, indicating the need for economic policy support.
The price of U.S. benchmark crude oil dipped to $80.16 a barrel in electronic trading on the New York Mercantile Exchange, while Brent crude, the international standard, fell to $83.94 a barrel. The U.S. dollar strengthened to 141.87 Japanese yen, and the euro slipped to $1.1012.
The overall outlook for Asian stocks remains positive, driven by encouraging profits, hopes for stimulus measures, and the perception that inflation may be increasingly under control. However, critics warn that the stock market rally may have progressed too rapidly. Traders eagerly await the Federal Reserve’s decision on interest rates to gain further clarity on future market trends.
