Asian Stocks Set to Decline as Meta Slows in Big Tech Companies: Markets Wrap

(Bloomberg) — Asian stock markets fell after Meta Platforms Inc.'s disappointing outlook sparked… Concerns about whether the industry that fueled the bull market in stocks has gone too far.

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Stock indexes in Japan and South Korea fell, while Hong Kong futures also fell. Australian financial markets are closed for holiday. The yen traded in a narrow range after falling beyond 155 yen to the dollar for the first time in more than three decades on Wednesday, increasing the chances of intervention.

A $250 billion exchange-traded fund tracking the Nasdaq 100 took a hit after the close of regular US trading as Facebook's parent company fell more than 15%. Meta expected second-quarter sales to be below analysts' expectations and raised its spending estimates for the year.

“Meta resources are enormous, but they are not infinite,” said Sophie Lund-Yates, an analyst at Hargreaves Lansdowne PLC. “The language surrounding spending plans has become bolder again, and this may be what spooks the markets.”

In the run-up to the results, the S&P 500 struggled to gain momentum, hovering near 5,070 as traders braced for economic data that will help shape views on the Fed's next steps. Treasuries opened little changed in Asia after yields rose on Wednesday.

In Japan, the yen fell to 155.37 yen to the dollar on Wednesday, marking the first time since June 1990 that the currency has crossed the 155 level. Traders will be alert for any comments from officials in Tokyo on Thursday that suggest a higher state of readiness for intervention.

Japan Airlines CEO Mitsuko Tottori said in a group interview that Japan's weak currency was a “big problem,” adding that a stronger interest rate than the current level of about 155 yen to the dollar would be better.

South Korea's SK Hynix said it expects a full recovery in the memory market after demand for artificial intelligence spurred the chipmaker to record the fastest pace of revenue expansion since at least 2010.

Elsewhere, oil saw a modest decline, with a risk-off tone in broader markets in the face of a decline in US inventories. Gold has changed little.

Profits unfold

Facebook's parent company reported revenue of $36.5 billion in the first quarter, an increase of more than 27% compared to the same period last year. That was a small win, with analysts looking for revenue of $36.1 billion on average, according to estimates compiled by Bloomberg. Profits doubled to $12.4 billion.

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“We encourage investors to focus on the positives,” said Tejas Desai of Global X ETFs. “The company's fundamentals continue to show strength, and that's the main story.”

For Nationwide's Mark Hackett, while the G7 tech giants have performed well in the past two years due to their superior earnings growth compared to the broader market, that advantage could decline in 2024 and more significantly in 2025.

“The 'Game Seven' are not as strong as they used to be,” Hackett said. “We see this as a positive development for investors looking to diversify away from new market leaders.”

For weeks, traders have been reducing the number of interest rate cuts they expect from the Federal Reserve amid a string of resilient economic data. Economists polled by Bloomberg expect GDP to likely cool to around 2.5% in the first quarter, though numbers still point to persistent inflationary pressures.

“A pivotal GDP report comes tomorrow with market participants hoping for a weak number that will lead to interest rate cuts sooner rather than later,” said Jose Torres of Interactive Brokers. “We expect a stronger-than-expected number. That would be great for revenue growth prospects, but bad for the timing and extent of interest rate cuts.

Main events this week:

• US GDP, wholesale inventories, initial jobless claims, Thursday

• Microsoft, Alphabet and Airbus earnings on Thursday

• Japan interest rate decision, Tokyo CPI, inflation expectations and GDP, Friday

• US Personal Income and Spending, Personal Consumption Expenditures Deflator, University of Michigan Consumer Confidence, Friday

• Exxon Mobil and Chevron earnings on Friday

Some key movements in the markets:

Stores

• S&P 500 futures were down 0.6% as of 9:09 a.m. Tokyo time.

• Hang Seng futures fell 0.4%

• S&P/ASX 200 futures fell 0.8%

• Japan's Topix index fell 0.8%.

• Euro Stoxx 50 futures fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• There was little change in the euro at $1.0704

• There was little change in the Japanese yen at 155.26 to the dollar

• There was little change in the yuan in external transactions at 7.2711 to the dollar

Digital currencies

• Bitcoin rose 0.4% to $64,329.07

• Ethereum rose 0.5% to $3,144.18

Bonds

Goods

This story was produced with assistance from Bloomberg Automation.

–With the help of Rita Nazareth.

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