Asian stocks saw a positive boost, primarily led by Chinese technology stocks after Alibaba Group Holding Ltd. reported its strongest revenue growth in over a year. The upbeat earnings report sparked optimism within the sector, with Alibaba’s stock surging by up to 11%.
Equities in Hong Kong and broader Asian indices advanced, reflecting this rally. However, Japanese stocks remained flat, while gold stayed close to a record high, and Treasuries remained largely unchanged after a drop in US equities from their record highs.
Optimism for Chinese Tech Amid AI Surge
Despite the ongoing geopolitical tensions and the risk of a widening tariff war, there has been increasing enthusiasm for Chinese tech companies, particularly around the advancements in artificial intelligence (AI). DeepSeek’s AI model has generated significant buzz, attracting global investments and propelling a $1.3 trillion rally in Chinese stocks. Alibaba’s growth has certainly fueled this excitement.
Ron Temple, chief market strategist at Lazard Asset Management, cautioned that these growth spurts are likely short-lived without significant structural reforms in China, suggesting that investors should “trade those rallies” rather than commit long-term.
Alibaba’s Focus on Artificial Intelligence
Alibaba’s CEO, Eddie Wu, emphasized the company’s shift toward artificial general intelligence as its “primary objective.” The company plans to continue developing AI models that push the boundaries of intelligence, signaling Alibaba’s commitment to leading the innovation in this space.
Experts such as Chris Weston from Pepperstone Group noted that Alibaba’s strong earnings validate the capital flow from US tech stocks toward Chinese AI plays, justifying the recent surge in the stock market.
Yen Weakens as Market Expectations Grow for BOJ Rate Hike
In Japan, the yen weakened past 150 per dollar on Friday after initially strengthening earlier in the week. This comes amidst speculation that the Bank of Japan (BOJ) may hike interest rates sooner than expected. There is now an 84% chance of a 25 basis point hike at the July meeting, a significant increase from the 70% chance at the beginning of the month.
Japan’s inflation data showed a greater-than-expected rise, with consumer prices (excluding fresh food) up 3.2% in January, the largest increase since June 2023. This has led to further expectations of rate hikes from the BOJ, with Carol Kong of Commonwealth Bank of Australia indicating that the USD/JPY could hit its forecast of 149 earlier than expected.
US Market Performance and Treasury Outlook
In the US, stocks saw a modest dip with the S&P 500 slipping 0.4%. A major factor contributing to this was a drop in Walmart shares following its earnings report, marking the first big-box retailer to report results after the holiday season. The retail sector has shown signs of strain, particularly after consumer retail sales showed an unexpected pullback. Meanwhile, major banks like JPMorgan Chase and Goldman Sachs each fell over 3.8%.
Treasuries saw little movement in Asia, and Treasury Secretary Scott Bessent suggested that the move to increase the share of longer-term Treasuries in government debt issuance was still far off due to challenges such as elevated inflation and the Federal Reserve’s ongoing quantitative tightening program.
Commodities Outlook
Commodities saw significant movement, with oil heading for its biggest weekly gain since early January, largely driven by increasing supply uncertainties. Gold, on the other hand, remained near record highs, supported by growing demand for safe-haven assets due to geopolitical and trade tensions, as well as concerns about the global economic outlook. Gold is on track for its eighth consecutive weekly gain.
Conclusion
The performance of Alibaba has certainly set the tone for Asian markets, boosting sentiment around Chinese technology stocks and AI development. However, mixed signals from Japan and concerns about global geopolitical risks continue to make for a volatile market landscape. Meanwhile, commodity prices, especially gold and oil, remain high, as investors look for stability amid uncertainty.
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