Asian stocks advance after Wall Street’s rebound: Markets wrap

Stocks in Asia followed a rebound on Wall Street as investors looked beyond Joe Biden ending his reelection campaign to focus on the start of the tech earnings season.

The MSCI Asia Pacific Index snapped a three-day decline, as shares from Japan to South Korea and Australia rose at the open. That followed a 1.1% jump in the S&P 500, ahead of earnings from Tesla Inc. and Alphabet Inc. due later Tuesday.

Sky-high valuations and seasonal weakness have incited some stock pullback warnings, with traders also facing political uncertainties. Yet even with the many headlines that followed Biden’s decision to quit the race and endorse Kamala Harris, a sense of calm prevailed Monday. Volatility slumped as dip buyers emerged.


“This political shake-up shouldn’t materially alter the direction of the markets,” said Tom Essaye at The Sevens Report. “The ultimate direction of the S&P 500 will still be determined by economic growth.”

Almost two-thirds of respondents to Bloomberg’s Markets Live Pulse survey expect earnings to reinvigorate the US benchmark. A gauge of the “Magnificent Seven” climbed about 2.5%, led by gains in Tesla and Nvidia Corp. The Nasdaq Golden Dragon China Index, a gauge of US-listed Chinese shares, advanced 2.8%.

Treasury yields steadied ahead of this week’s readings on the economy as well as the Federal Reserve’s preferred inflation gauge. For much of July, bets on a rate cut in September drove shorter-term bonds up — narrowing the gap with longer-dated maturities.

Australian bond yields advanced, while the currency was little changed after a six-day slump as commodity prices tumbled. The greenback was steady in early Asian trading.

The Japanese yen hovered near 157 per dollar ahead of the Bank of Japan’s policy meeting next week. BOJ officials see weakness in consumer spending complicating their decision over whether to raise interest rates this month, according to people familiar with the matter.

Elsewhere in Asia, India’s Finance Minister Nirmala Sitharaman will present the budget Tuesday, laying out economic priorities of a new coalition government under Prime Minister Narendra Modi.

After driving the rally in US stocks for most of the year, big tech slammed into a wall last week. Investors rotated from high-flying megacap shares to riskier, lagging parts of the market, spurred by bets on Fed rate cuts and the threat of more trade restrictions on chipmakers.

Strategists at BlackRock Investment Institute are reiterating their conviction in US equities after the S&P 500 logged its worst week in three months.

“We see pullbacks as an opportunity to lean into stocks,” a team led by Wei Li wrote. “Looking through near-term noise” of the small-cap rally, big tech is likely to keep driving returns as companies carry positive earnings results for the market, the strategists said.

Profit estimates for the S&P 500 in the second quarter haven’t been cut as much as previously, according to JPMorgan Chase & Co. strategists, a sign that there’s little room for disappointment this earnings season. A team lead by Mislav Matejka said usually projections fall by 5% in the three months before results, but this time it’s been about 1%.

In commodities, oil steadied near a five-week low after trend-following commodity trading advisers, or CTAs, spurred a run of losses.