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MOST markets rose in Asia on Friday after forecast-topping earnings from Microsoft and Alphabet helped soothe worries that a tech-fuelled equities rally may have been overdone.
However, the mood was clouded by fresh worries about the economic outlook after worse-than-expected US data combined with a forecast-topping print on core inflation that fanned speculation the country could top into stagflation.
Investors were awaiting the release later in the day of the Federal Reserve’s preferred gauge of inflation, personal consumption expenditures (PCE) index, hoping for an idea about its plans for interest rates ahead of next week’s policy meeting.
The Bank of Japan is also set to announce its own decision later in the day, with traders keen to get a handle on its outlook as it slowly shifts away from years of extreme monetary easing.
Asian investors have enjoyed a largely upbeat week as a healthy earnings season has been seen to justify some of the big gains across equities in recent months, which have offset fading hopes for Fed rate cuts.
The rally has been helped by blockbuster reports from heavyweights Microsoft and Alphabet, which topped estimates, while the latter also announced its first dividend. Social media company Snap also provided a bullish revenue projection.
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All three soared in after-hours trade, helping push up US futures.
The results helped temper concerns sparked by news that Facebook-parent Meta expected to spend more this year than had been anticipated owing to investment in artificial intelligence.
Tech firms across Asia rode the coattails of the earnings, with Hong Kong-listed Meituan, Japan’s Advantest and Samsung in Seoul all up.
And the region’s markets benefited.
Hong Kong, Seoul and Taipei put on more than one per cent, while Tokyo, Shanghai, Singapore and Manila were also up. Still, there were losses in Sydney, Wellington and Jakarta.
Wall Street’s three main indexes had earlier ended deep in the red – though off initial lows – following news that the US economy grew far less than expected in the first quarter while consumer spending was short of estimates.
At the same time, an index of core prices came in much hotter than forecast – sparking fears the United States could be heading for a period of stagnant growth and spiking inflation.
“This report was the worst of both worlds: economic growth is slowing and inflationary pressures are persisting,” Chris Zaccarelli, of Independent Advisor Alliance, said.
“The Fed wants to see inflation start coming down in a persistent manner, but the market wants to see economic growth and corporate profits increasing.”
All eyes are on the PCE reading, which comes after three straight months of above-forecast consumer price index figures that – along with warnings from monetary policymakers – dented expectations for how many cuts the bank will make this year.
The Bank of Japan is expected to keep borrowing costs on hold after raising them for the first time in 17 years last month.
That is even as officials stand ready to intervene in currency markets to support the yen as it sits at three-decade lows against the dollar owing to dimming US rate cut hopes. AFP
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