Asian equities remained within a narrow range on Wednesday, as mainland Chinese and Hong Kong stocks bounced back following a significant selloff in technology stocks. Chinese tech shares rose more than 2%, led by Alibaba Group Holding Ltd. and JD.com Inc., helping to stabilize the regional market.
The market opened lower initially due to a disappointing US consumer confidence report, which raised concerns about the economic outlook of the world’s largest economy. However, Chinese stocks managed to recover as optimism surrounding artificial intelligence and President Xi Jinping’s meeting with corporate leaders boosted investor sentiment.
Optimism for Chinese Equities
Chinese equities have seen gains this year, driven by optimism surrounding advancements in artificial intelligence and the potential end of the year-long crackdown on the private sector. This comes as a contrast to the decline in US stocks, which fell following the sharpest drop in consumer confidence since August 2021.
Frank Benzimra, a strategist at Societe Generale SA, noted that for Chinese stocks, the positioning is light, valuations are low, and earnings could exceed expectations. He also pointed to upcoming Chinese policy meetings, US trade policy, and the earnings season as key factors to watch moving forward.
Concerns Over US-China Economic Tensions
Despite the optimism in Chinese equities, President Donald Trump’s push to decouple economic ties between the US and China has added to global uncertainty. Investors who had bet on a sustained rebound in Chinese stocks are now facing additional concerns over trade relations between the two nations.
US Treasury Yields and Inflation
The yield on 10-year US Treasuries remained largely unchanged after a slight drop overnight, holding at its lowest levels since mid-December. Yields on Australian and Japanese bonds also declined in early Wednesday trading. Money markets are now pricing in more than two quarter-point interest rate cuts by the Federal Reserve in 2025.
Copper Prices and Inflation Data
Copper prices rose following Trump’s executive action directing the Commerce Department to investigate potential tariffs on the metal. Investors are also awaiting the release of the core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation measure, which is expected to show the slowest inflation pace since June.
Nvidia Earnings and Economic Outlook
Investors are closely watching Nvidia’s earnings report set for Wednesday, as it serves as a key indicator for the artificial intelligence sector. Nvidia’s stock dropped 2.8% ahead of the report, reflecting the ongoing uncertainty in US markets.
Other Market Movements
In other markets, oil prices in New York steadied after dipping back into the $60s per barrel, as concerns over a weakening economic outlook threatened energy demand. Gold retreated, and Bitcoin extended its losses, falling 6% in early Wednesday trading following a significant slump overnight.
Related topics:
