Asian Markets Face Cautious Start as US Futures Slip: Market Update

Asian markets are approaching the trading session cautiously as US stock futures show a slip in early Asia trading. Disappointing results from major companies like Netflix Inc. and Tesla Inc. have influenced the sentiment. Equity futures for Japan have declined, while contracts for Australia remain relatively stable. However, Hong Kong might witness a slight reprieve from its two-day slide, with equity futures indicating a small gain. Additionally, an index of US-listed Chinese companies showed signs of recovery from its recent downturn.

In Asia, futures for the S&P 500 and Nasdaq 100 have also ticked lower, primarily driven by Netflix's decline of 8.18% in postmarket trading. The company's sales missed estimates, and its third-quarter forecast fell short, affecting market confidence. Tesla, on the other hand, witnessed a 4.98% drop in profitability during the second quarter, indicating potential pressure on the electric-vehicle maker's margins.

Official trading on Wednesday saw the S&P 500 rise for a third day. The tech-heavy Nasdaq 100 ended marginally lower, while the blue-chip Dow Jones Industrial Average extended its winning streak into an eighth day, marking the longest rally since September 2019. Notable companies like Apple Inc. made advances, with Bloomberg reporting on their efforts to develop artificial intelligence tools. Goldman Sachs Group Inc. also closed positively, despite a profit slump that stood in contrast to earlier beats from peer investment firms.

US Treasuries gained momentum following a UK inflation report that led to a decline in guilt yields. This suggests that central banks might adopt a more cautious approach to raising interest rates. However, gains in the Treasury curve were dampened by a spike in commodities, including wheat, after Russia warned that any ships to Ukraine would be seen as carrying arms.

The dollar showed strength against most of its Group of 10 counterparts, while the pound experienced a significant intraday drop of 1.3%, the largest in over four months. The yen and the Aussie were also among the underperformers on Wednesday.

Meanwhile, in the US, data revealed that new home construction retreated in June after a surge the previous month. Additionally, applications to build, which serve as a proxy for future construction, also slipped.

Looking ahead, Japan's trade deficit is expected to narrow for the previous month as exports increased, while Australia is set to report jobs figures for June following an unexpected surge in the prior month.

Amidst easing price pressures in the US and UK, investors remain optimistic that a campaign of monetary tightening is nearing its end. However, the Federal Reserve's path to victory is not entirely secure, as shaky economic reports continue to raise concerns.

According to Neil Dutta, head of economics at Renaissance Macro Research, "The risk of recession has receded dramatically." Yet, he cautions that the market should be wary of becoming overly optimistic about a soft-landing scenario, as a resurgence of inflationary boom is still plausible.

In the corporate world, Carvana Co. experienced significant gains of 40% after reaching a deal to restructure its debt and filing to sell up to $1 billion in stock. Additionally, AT&T Inc. rose 8.5% after providing reassuring information, stating that less than 10% of its nationwide copper-wire telecom network had lead-clad cables.

As investors keep a close eye on the situation, key events for the week include China loan prime rates, US initial jobless claims, existing home sales, Conf. Board leading index, and Japan CPI.

In the stock market, S&P 500 futures fell 0.3%, Nasdaq 100 futures fell 0.6%, and Nikkei 225 futures fell 0.4%. Australia's S&P/ASX 200 Index futures remained unchanged, while Hang Seng Index futures rose 0.3%.

Regarding currencies, the Bloomberg Dollar Spot Index held steady, the euro remained unchanged at $1.1204, the Japanese yen remained at 139.65 per dollar, and the offshore yuan remained steady at 7.2314 per dollar. The Australian dollar also experienced little change at $0.6768.

Cryptocurrencies Bitcoin and Ether showed minor declines of 0.3% and 0.6%, respectively.

In the bond market, the yield on 10-year Treasuries declined by four basis points to 3.75%, while Australia's 10-year yield advanced by four basis points to 3.91%.

As for commodities, West Texas Intermediate crude fell 0.2% to $75.23 a barrel, and spot gold remained unchanged.

Also Read: Dollar Slides, Stocks Rally Ahead of US Inflation Data: Market Highlights