Asia Eyes Soft Open After Fed, US Tech Earnings: Markets Wrap
(Bloomberg) -- Asian stocks were poised to track their US peers lower on Thursday after the Federal Reserve held rates unchanged as expected, with Chair Jerome Powell saying officials were not in a hurry to lower rates.
Australian shares were steady and equity futures Japan fell as major Asian markets, including Hong Kong and mainland China, remained closed due to the Lunar New Year holiday. In the US, tech earnings were in focus as Tesla Inc. climbed after saying it expects vehicle sales to climb this year after a challenging 2024. Meta Platforms Inc. rebounded after an initial slide that followed their results while Microsoft Corp. slid as growth in its cloud-computing business slowed during the last three months of last year. International Business Machines Corp. soared on better-than-projected sales and profit.
The Federal Open Market Committee kept the federal funds rate in a range of 4.25%-4.5%. In a statement, officials repeated that inflation remains “somewhat elevated” but removed a reference to it having made progress toward their 2% goal. Later, Powell clarified the reference to inflation was just a decision to shorten the sentence, rather than send any sort of meaningful signal.
“I find this hard to believe given that the Fed knows the market is hanging on its every phrase and wording,” said Win Thin, global head of markets strategy at Brown Brothers Harriman & Co in New York.
The yield on 10-year Treasuries was mostly unchanged as traders parsed tweaks to the Fed’s statement. While expectations for a March rate reduction had increased earlier this week during a tech-driven rout in stocks that fueled demand for Treasuries, the swaps market is now pricing only a narrow chance of a reduction.
The dollar was steady against major peers in early trading. The loonie pared losses Wednesday after the Bank of Canada cut rates, but dropped guidance on any further adjustments to borrowing costs.
In Asia, attention will soon shift to Reserve Bank of Australia Assistant Governor for the Financial System Brad Jones’ appearance later Thursday after soft fourth quarter inflation data. While traders increased the odds the central bank will begin its rate cut cycle next month, markets are yet to fully price a 25 basis point reduction, according to swaps data compiled by Bloomberg.
A speech by Bank of Japan Deputy Governor Ryozo Himino will also be closely watched for hints on the central bank’s next move after last week’s rate hike.
“The Fed looked hawkish, though Powell sounded slightly soft, and so Himino has room to go bullish for more rate hikes” and may even change language from the last policy statement, said Shoki Omori, chief global desk strategist at Mizuho Securities Co. in Tokyo. “Given that markets are not pricing in a very near term hike, the yen will likely richen quickly if Himino sounds surprisingly hawkish on Japan’s economy and inflation.”
Earnings Season
Aside from the Fed decision, traders focused on the start of the megacap earnings season as investors increase scrutiny on their spending on artificial intelligence and the meager returns they’re generating from the technology. While profits from the Magnificent Seven behemoths are still rising — and far outpacing the rest of the market — growth is projected to come in at the slowest pace in almost two years.
The recent volatility among tech giants has been particularly worrisome for Wall Street, as the S&P 500’s leadership hasn’t been this concentrated in more than 20 years. Data shows that less than one-third of index members were able to outperform the S&P 500 during the past two years, as Bank of America Corp. strategist Michael Hartnett has called out.
That resembles the run-up to the dot-com bubble at the end of the 1990s, when a similarly slim cadre of stocks were beating the benchmark. The risks for markets from such concentration have been on display this week, as the DeepSeek jolt wiped out half a trillion dollars of Nvidia’s market value.
“The DeepSeek correction in tech stocks has not changed the overall concentration problem in the S&P 500,” said Torsten Slok at Apollo Management. “Investors in the S&P 500 continue to be dramatically over-exposed to the tech sector.”
In commodities, oil pared Wednesday’s loss in early trading. Crude dropped 1.6% on Wednesday after President Donald Trump’s pick for commerce secretary suggested tariffs on Canada and Mexico aren’t a done deal following expectations that the tariffs will go into effect this weekend.
Key events this week:
Some of the main moves in markets:
Stocks
Currencies
Cryptocurrencies
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.