As the week comes to a close, the Asian share index shows signs of recovery, thanks to a strong performance by the tech sector. However, US equity futures face a downturn following a previous session's surge in artificial intelligence stocks.
Throughout the region, benchmark indexes experienced gains in countries such as Japan, South Korea, India, and Australia, while mainland China saw a decline. Notably, Japan's Screen Holdings Co. witnessed a remarkable surge of up to 9%, South Korea's SK Hynix Inc. jumped 5.5%, and Taiwan Semiconductor Manufacturing Co. advanced 4.6% on the back of a bullish sales forecast from Nvidia Corp.
The AI rally continued even after-hours in the US, with Marvell Technology Inc. projecting significant revenue growth from the technology in 2024. Nvidia, on the other hand, saw its shares soar by 24%, inching closer to the impressive milestone of a $1 trillion market value.
Meanwhile, concerns loom over the US debt-ceiling debate as negotiations intensify. President Joe Biden and top Republican lawmaker Kevin McCarthy are reportedly only $70 billion apart on discretionary spending, adding a sense of urgency to the discussions. The upcoming slate of bill auctions announced by the Treasury has sparked speculation regarding the exact date when the government will run out of cash, suggesting that the previously anticipated June 1 "X-date" might be delayed. Treasury's cash balance has dwindled to a mere $49.47 billion, and while funding for discretionary spending on military and veterans appears to be secure, sticking points remain, including work requirements for anti-poverty programs and funding for the Internal Revenue Service to strengthen audits targeting wealthier individuals.
The uncertainty surrounding the debt-ceiling talks has contributed to market jitters, with investors carefully analysing signals and their potential impact. Moreover, growing doubts emerge about the Federal Reserve's stance on interest rates in June. The CME FedWatch Tool now indicates a likelihood of over 50% for a quarter-point rate rise to 5.25-5.50% on June 14.
Amid these developments, the yen remains steady against the greenback, hovering around the 140 level. Market expectations of an impending rate hike by the Federal Reserve in the coming policy meetings have caused the Japanese currency to depreciate, while the Bank of Japan maintains its ultra-loose policy. Tokyo's slowing inflation, which supports the divergence between the Bank of Japan and the Fed, has helped keep the yen in check, benefiting Japanese stocks.
Looking ahead, market participants must navigate the delicate balance between rate expectations and the nearing peak of the interest rate cycle. The focus on rate direction rather than the potential for rate cuts in the next six months remains a point of contention.
In other markets, oil stabilizes after a significant drop of over 3% due to Russia's indication that OPEC+ is unlikely to alter production levels at the upcoming meeting.
As the week concludes, key economic indicators to watch out for include the US Commerce Department's release of the personal consumption expenditures (PCE) price index figures for April, which are expected to show a modest increase similar to March.
Furthermore, market attention turns to the speeches by ECB's Philip Lane and Croatian central bank Governor Boris Vujcic, as their insights could influence market sentiment.
Stay tuned for the latest market updates.
Key Developments on Friday:
U.S. PCE price index
Speeches by ECB's Philip Lane and Croatian central bank Governor Boris Vujcic