Asian stocks dipped on Friday as optimism about China’s rescue measures waned, and weak results from Intel Corp were scrutinized. Mainland China and Hong Kong shares fell after the largest three-day rally since 2022, with Morgan Stanley lowering targets for major Chinese stock indexes, citing challenges in debt, demographics, and deflation.
Vishnu Varathan, chief economist for Asia ex-Japan at Mizuho, highlighted China’s drag risks and potential political uncertainty in Asia. Japan’s Nikkei index dropped about 1.5%, while Korea’s benchmark gained. US equity futures retreated after Intel’s disappointing forecast, while Europe’s markets advanced.
In Tokyo, inflation cooled below 2%, prompting considerations about the Bank of Japan’s negative interest rates. Australia and India markets were closed for holidays.
Wall Street marked a sixth day of gains, reaching another all-time high as US GDP data defied recession forecasts. The S&P 500 closed near 4,900, with US 10-year yields sliding. Swap contracts predicted a Fed interest-rate cut in May, reinforcing bets on total cuts this year.
The equity rally, driven by falling inflation and potential Fed rate cuts in 2024, surpassed Wall Street forecasts. With the US stock market at a record, investors question the longevity of the rally that began last year. Historical data suggests that previous S&P 500 climbs from bear markets to new highs resulted in above-average returns in the subsequent six and 12 months.
