NEW YORK: US equity-index futures climbed as strong earnings from megacap tech firms bolstered optimism that corporate profits remain resilient. The dollar steadied after gaining on Federal Reserve holding interest rates.
Contracts for the Nasdaq 100 rose 1.2 per cent and those for the S&P 500 advanced 0.9 per cent as Microsoft Corp. and Meta Platforms Inc. surged in after-hours trading. Asian shares fell 0.3 per cent. South Korean equities fluctuated after the country reached a trade deal with the US, while the Nikkei-225 gained 0.8 per cent ahead of the Bank of Japan’s rate decision. Chinese indexes dropped as factory activity unexpectedly worsened.
Copper rose in London – following a collapse in New York – after US President Donald Trump shocked the metals world by exempting the most widely traded forms of copper from his hotly anticipated import tariffs.
Investors navigated a barrage of headlines Wednesday (July 31), from trade tensions and central bank decisions to a wave of corporate earnings. Treasuries declined and the dollar gained as markets dialed back bets on a September rate cut. Significant trade developments in India, South Korea and Canada also drew attention ahead of the Aug. 1 tariff deadline. Adding to the mix, megacap tech firms delivered stellar earnings.
“While expectations of a rate cut have eased following yesterday’s Fed meeting, strong earnings and outlook from Nasdaq heavyweights Meta and Microsoft reinforce confidence in the AI-driven growth narrative,” said Gary Tan, portfolio manager at Allspring Global Investments in Singapore. The robust performance “continues to justify high tech hardware spending.”
The S&P 500 fell 0.1 per cent and Treasury 10-year yields rose around five basis points Wednesday. The dollar strengthened 0.8 per cent as Fed Chair Jerome Powell said no decision had been made about easing policy in September. A gauge of the currency was little changed in Asian trading Thursday.
While the concerted pullback in stocks and bonds looked mild, it marked the worst Fed day since December. The US labour market “looks solid,” Powell said, while inflation remains above target.
“To get that rate cut, the Fed will need to gain confidence that either inflation increases will be one-off and muted, or that inflation will continue to trend lower in the months and quarters ahead,” said Bret Kenwell at eToro.
On South Korea, Trump said he reached a trade deal that would impose a 15 per cent tariff on its exports to the US and see Seoul agree to US$350 billion in US investments.
Trump also said he would impose a 25 per cent tariff on India’s exports to the US starting Friday and threatened an additional penalty over the country’s energy purchases from Russia. India’s faltering equities market faces the risk of more losses.
On copper, the industrial metal rose 0.3 per cent to US$9,728.50 a tonne on the London Metal Exchange as of 8:01 a.m. in Malaysia.
When the US president first flagged the likelihood of tariffs early this year, he triggered a surge in US copper prices relative to the rest of the world and set off a race to ship copper to the US to beat the tariffs.
Elsewhere in Asia, investors will be focused on a Bank of Japan rate decision, which is expected to keep rates steady. The yen gained 01. per cent to trade at 149.29 to the dollar.
The ruling Liberal Democratic Party needs to debate Prime Minister Shigeru Ishiba’s fate, which likely means that BOJ Governor Kazuo Ueda will strike a cautious tone today. That will fuel curve steepening for JGBs as inflation is sticky and the central bank is behind the curve in cooling it. Traders are pricing around 77 per cent probability of a rate hike by the time of the December BOJ meeting.
Meanwhile, the Federal Open Market Committee voted 9-2 on Wednesday to hold the benchmark federal funds rate in a range of 4.25 – 4.5 per cent, as they have at each of their meetings this year. Governors Christopher Waller and Michelle Bowman voted against the decision in favor of a quarter-point cut.
Money markets pared bets on rate reductions this year and traders now see a less than 50 per cent chance of a cut in September. The odds for a reduction in October dropped to around 85 per cent, whereas they were fully priced-in before Powell began to speak.
“The next two months’ data will be pivotal and we see a path to a resumption of the Fed’s easing cycle in the autumn should tariff inflation prove more modest than expected or the labor market show signs of weakness,” said Ashish Shah at Goldman Sachs Asset Management.
On technology earnings, the biggest take away was that the massive levels of capital expenditures are starting to get monetised, said Chris Weston, head of research at Pepperstone Group in Melbourne. Asian technology stocks mostly advanced.
“We are starting to see signs that that bet is gonna pay off and pay off pretty handsomely,” he said. – Bloomberg