Shares experienced a significant surge in Shanghai on Tuesday as Chinese markets reopened following a week-long holiday. However, this initial excitement diminished as Beijing unveiled details aimed at revitalizing the world’s second-largest economy. The Shanghai Composite index climbed 5.5% to 3,519.88 while Shenzhen’s main index rose by 5.3%. Glimpsing a remarkable 10% increase at one point, the Shanghai benchmark ultimately settled lower as officials from China’s top economic planning agency addressed the media regarding various policies designed to tackle critical issues, notably a slump in the property market.
Conversely, Hong Kong’s Hang Seng fell sharply, sinking 5.8% to 21,758.45, as traders opted to secure profits from their recent gains. Stephen Innes from SPI Asset Management remarked that the initial enthusiasm of investors was swiftly extinguished, leaving many feeling disappointed after such a promising start.
In other parts of Asia, the trends were largely downcast. Tokyo’s Nikkei 225 index dipped by 1.2% to 38,861.09, influenced by the dollar weakening against the yen, which fell to 147.91 from 148.18. Meanwhile, Seoul’s Kospi declined by 0.5% to 2,596.38, and Australia’s S&P/ASX 200 edged down by 0.2% to 8,187.10.
U.S. markets, in contrast, faced a decline on Monday as Treasury yields soared to their highest levels since the summer, coupled with escalating oil prices. The S&P 500 dropped by 1% to 5,695.94, remaining near its all-time high set just a week prior. The Dow Jones Industrial Average decreased by 0.9% to 41,954.24, also retreating from its recent record, while the Nasdaq composite fell by 1.2% to 17,923.90.
This dip follows a remarkable rally for U.S. stocks driven by the optimism surrounding expectations that interest rates would begin to decline. Recent robust jobs growth data further fueled hopes for an economic “soft landing.”
The climb in Treasury yields reflects a shift in market sentiment, as higher yields from safest investments like Treasury bonds encourage investors to seek more rewarding avenues, casting a shadow on high-priced stocks. A notable 10-year Treasury yield climbed to 4.02%, up from 3.97% late last week, leading cautious investors to reassess their risk appetites.
With rising Treasury yields, companies will need to showcase significant profit growth to attract investors. Analysts anticipate a growth of 4.2% in earnings per share for S&P 500 companies this past summer compared to the previous year, driven primarily by strides in technology and healthcare sectors. This week marks the onset of the latest corporate earnings season, crucial in determining market direction.
In other early market movements on Tuesday, the euro strengthened slightly against the dollar, rising to $1.0986. In the realm of commodities, Brent crude oil prices took a slight dip, settling at $79.70 per barrel after experiencing a 3.7% increase on Monday, while U.S. benchmark crude also fell to $75.90.
In addition, specific tech stocks faced downward pressure due to their elevated valuations amidst climbing Treasury yields. Although giants like Apple and Amazon experienced declines, Nvidia bucked the trend with a 2.3% rise, boosted by heightened interest in artificial intelligence technology after Super Micro Computer announced impressive shipment figures for its graphics processing units.
Overall, the markets reflect a complex interplay of investor sentiment and external pressures, highlighting challenges and opportunities that lie ahead. As we closely monitor these fluctuations, the ongoing corporate earnings reports could have a substantial impact on future market trajectories.