Asian stocks were neutral on Friday as concerns about the global economy increased as more than a year of monetary tightening began to take effect and optimism over a potential break-in Federal Reserve interest rate hikes washed away once more.
Apple, Amazon, and Alphabet, three Wall Street giants worth a combined $5 trillion, reported disappointing earnings, which suggested that rising borrowing rates and soaring inflation were affecting consumer demand.
The numbers came in toward the conclusion of a week when the stock market boom that had dominated most of January came to a halt due to concerns among traders that the buyer had been excessive and that the economy still faced many challenges.
The excitement regarding China’s reopening and recovery after nearly three years of zero-Covid policies that severely hampered corporate activity was also tempered by these worries.
They also tempered the upbeat atmosphere brought on by the Fed’s admission that it was making headway in bringing inflation down from multi-decade highs, stoking optimism that the Fed’s rate-hiking cycle was about to come to an end.
Now all eyes are on the release of US jobs data later on Friday, which will give a clearer picture of the status of the largest economy in the world.
According to Stephen Innes of SPI Asset Management, “a softer payrolls number, so long as it does not fall off a cliff sparking a recessionary (backlash), might re-engage all the favorite trades of the year.”
Not to mention, it would offer the strongest proof to date that the market’s rates are priced more accurately than the Fed’s own more subtly hawkish higher for longer signaling. The three major indexes on Wall Street finished largely higher, with the Nasdaq adding more than three percent as a result of Meta, the owner of Facebook, reporting results that were above expectations.
The after-hours reports from Alphabet, the parent company of Google, Amazon, and Apple, however, brought investors back to reality.
According to Apple, sales declined more than anticipated between October and December, while sluggish consumer demand hurt Amazon’s earnings and Alphabet’s results below expectations.
In research on Apple, Harmeet Singh Walia of Counterpoint Research stated that “the war in Ukraine, inflationary pressures, economic uncertainty, and macroeconomic headwinds kept the consumer sentiment negative in 2022 while smartphone users lowered the frequency of their purchases.”
Shanghai lost more than one percent, and Hong Kong, which lost close to two percent, led to declines in Asian trade. In addition to Taipei, Singapore, Seoul, and Wellington also experienced declines.
Jakarta, Manila, Sydney, and Tokyo all increased.
Both the Nasdaq and S&P 500 futures were in the red.
Even though the Fed raised interest rates more than the ECB and the Bank of England did on Thursday, the euro and the pound continued to decline on currency markets.
With US stocks rising more than anticipated last week, crude prices dipped somewhat the day before as selling pressure increased due to worries about the demand and economic prospects.
Oil is “in a bit of a limbo as the market waits for concrete indicators of China’s oil demand revival,” according to Vandana Hari of Vanda Insights.