Stocks hit by slide in tech as yen flails at intervention zone
If Meta is a guide, it seems the market is simply not tolerant of in-line – if you've had a good run through Q1 & Q2 you either blow the lights out, or the market takes its pound of esh."
Chris Weston,
Pepperstone
Asian stocks fell yesterday as disappointing earnings forecasts from Facebook parent Meta Platforms hammered tech shares, while the yen's slump past 155 per dollar for the first time since 1990 raised the spectre of intervention from Tokyo.
A 15 per cent dive in shares of Meta in extended trading after the Instagram parent forecast lighter-than-expected current quarter revenue and higher expenses soured the mood, sparking a sell-off in US tech and tech-related stocks.
The hit to Asian tech stocks took MSCI'S broadest index of Asia-pacific shares outside Japan down 0.5 per cent. Japan's Nikkei slid 2 per cent.
The listless mood is set to continue in Europe, with Eurostoxx 50 futures down 0.12 per cent, German DAX futures down 0.14 per cent and FTSE futures 0.06 per cent lower.
In an earnings-packed week, tech bellwethers are in the spotlight, with Alphabet, Microsoft and Intel due to report yesterday.
"If Meta is a guide, it seems the market is simply not tolerant of in-line – if you've had a good run through Q1 & Q2 you either blow the lights out, or the market takes its pound of flesh," said Chris Weston, head of research at Pepperstone.
European earnings is also under way, with banking firms Deutsche Bank, BNP Paribas SA, Barclays PLC due to report yesterday.
Tech stocks had gotten a boost on Wednesday after Tesla said it would introduce "new models" by early 2025 using its current platforms and production lines.
Beyond corporate earnings, investor focus will be on the first quarter US gross domestic product data on Thursday and personal consumption expenditures, the Fed's preferred inflation gauge, for March on Friday.
A hotter-than-expected consumer price inflation report for March pushed back expectations of when the Fed will begin cutting interest rates, with markets pricing in a 70 per cent chance of the first cut coming in September, CME Fedwatch Tool showed.
Traders are pricing in 43 basis points of easing in 2024, drastically less than the 150 basis points they anticipated at the start of this year.
The shifting expectations of US rates have lifted Treasury yields and the dollar, casting a shadow on the currency market. Against a basket of currencies, the dollar was little changed at 105.75. The index is up over 4 per cent this year.
The yen, which is sensitive to US Treasury yields, has felt the brunt of the dollar's ascent and is down 9 per cent this year, the worst performing G-10 currency.
Yesterday, the yen was fetching 155.65 per dollar after touching 155.675, its weakest in 34 years during the session, past the 155 yen level that some traders had marked out as a line in the sand that would prompt Tokyo to take action.
The Bank of Japan (BOJ) started its two-day rate-setting meeting yesterday, with expectations that the central bank will keep its shortterm interest rate target unchanged.
Attention will be on BOJ Governor Kazuo Ueda's comments on Friday as he tries to maintain a calibrated path to exiting ultra-easy rates without upending the currency.
The BOJ chief will be mindful of avoiding the episode of 2022, when
predecessonr'sddovish his remarks triggered a yen plunge that forced Tokyo to intervene, selling an estimated $60 billion to defend the yen.
"At this stage, if they were to intervene, they might as well just throw their money into the sea," said Rob Carnell, head of Asia-pacific research at ING. "For all the good it will do except in the very short run."
Kieran Williams, head of Asia FX at Intouch Capital Markets, said the dollar/yen pair looks to be trading roughly in line with relative interest-rate spreads, suggesting Japan's Ministry of Finance would be fighting strong headwinds.
The nation's ruling party is not yet in active discussion on what yen levels would be deemed worth intervening in the market, though the currency's slide towards 160 to the dollar could prod policymakers to act, party executive Takao Ochi told Reuters.