Asian stocks experienced declines on Thursday, influenced by disappointing earnings forecasts from Meta Platforms, the parent company of Facebook, which led to a sell-off in technology shares. Additionally, the yen weakened past 155 per dollar for the first time since 1990, raising concerns about potential intervention by Tokyo authorities.
Shares of Meta plummeted 15% in extended trading after the company provided a downbeat outlook for the current quarter’s revenue and anticipated higher expenses. This negative news triggered a broader sell-off in U.S. tech and tech-related stocks, impacting sentiment in the Asian markets. As a result, MSCI’s broadest index of Asia-Pacific shares outside Japan fell by 0.5%, while Japan’s Nikkei declined by 2%.
The subdued sentiment is expected to carry over to European markets, with futures indicating declines in major indices such as Eurostoxx 50, German DAX, and FTSE.
Investor attention is focused on earnings reports from tech giants like Alphabet, Microsoft, and Intel, scheduled for Thursday. Additionally, European earnings reports from banking firms including Deutsche Bank, BNP Paribas SA, and Barclays PLC are anticipated.
Beyond corporate earnings, market participants await the release of first-quarter U.S. gross domestic product (GDP) data on Thursday and personal consumption expenditures for March on Friday, which serves as the Fed’s preferred inflation gauge.
Recent data showing higher-than-expected consumer price inflation for March has pushed back expectations of interest rate cuts by the Federal Reserve, with markets now pricing in a 70% chance of the first cut occurring in September.
The shifting expectations regarding U.S. interest rates have boosted Treasury yields and the dollar. Against a basket of currencies, the dollar remained relatively stable at 105.75, up over 4% for the year.
Meanwhile, the yen has weakened by 9% against the dollar in 2024, reaching its lowest level in 34 years. Market participants are closely monitoring the yen’s movement, with the currency trading beyond the 155 yen level, which could prompt intervention from Tokyo authorities.
The Bank of Japan (BOJ) commenced its two-day rate-setting meeting on Thursday, with expectations for the central bank to maintain its short-term interest rate target unchanged.
Market analysts emphasize the challenges faced by policymakers in influencing currency movements, given the prevailing market dynamics and relative interest-rate spreads.
Despite the yen’s slide, Japan’s ruling party has not initiated discussions on intervention, but further depreciation towards 160 yen to the dollar could prompt policymakers to take action.
In commodities trading, U.S. crude oil prices rose marginally to $82.89 per barrel, while Brent crude reached $88.13, up 0.12% for the day. Spot gold experienced a slight decline to $2,314.45 per ounce.