ASIA EQUITY SHINES, WHERAS DOW TRADED NEGATIVE
The Nikkei 225 Index rose 0.87% to close at a 2-month high of 28,176 while the broader Topix Index gained 0.85% to 1,947 on Friday, with both benchmarks finishing the week modestly higher, as investors navigated another volatile period marked by solid corporate earnings, mixed global economic data, hawkish Federal Reserve commentary and heightened US-China tensions. Meanwhile, investors remained cautious following reports that Chinese missiles landed in Japan’s exclusive economic zone. Nearly all sectors advanced on Friday, with notable gains from heavyweight firms such as Nintendo (3.1%), Tokyo Electron (2.8%), Toyota (1.5%), Fast Retailing (1.3%) and Sony Group (1.8%). Metals manufacturers also posted strong gains on upbeat quarterly results, including Nippon Steel (8.3%), Osaka Titanium (18.3%) and UACJ Corporation (21.7%).
The Shanghai Composite jumped 1.19% to close at 3,227 while the Shenzhen Component gained 1.69% to 12,269 on Friday, with mainland stocks erasing much of the losses caused by Sino-US tensions over Taiwan, as semiconductor stocks rallied on expectations of more government support for the sector to compete with other countries. Though caution across investor community remained cautious following reports that China fired a barrage of ballistic missiles into the waters around Taiwan as part of its large-scale military exercises following US House Speaker Nancy Pelosi’s visit to the island. Investors are also preparing for key US jobs data that could guide the outlook for US monetary policy amid fears that aggressive rate hikes across the globe would cause a recession. Gains among chipmakers and related firms were led by Naura Technology (10%), San’an Optoelectronics (8.3%), JCET Group (8.6%), Hangzhou Sila (10%) and Hangzhou Lion (10%).
The BSE Sensex rose just under 100 points to close at the near four-month high of 58,390 on Friday, supported by banking stocks after the RBI delivered a broadly expected 50bps interest rate hike. The raise in the key rate lifted borrowing costs to their highest since 2019, cementing the central bank’s intention to fight inflation and a plunging rupee. Also, the Monetary Policy Committee retained its 7% GDP growth forecast for the financial year, easing worries of an economic slowdown that emerged following a slew of concerning economic data. Banking stocks benefited from higher credit costs and led the gains in Mumbai, with ICICI Bank jumping over 2% while Axis Bank rose at a softer 1%. Also, Titan closed in the green after reporting a 13-fold increase in profits for the quarter ending in June. On the other hand, Mahindra & Mahindra dropped 2% after publishing results. On the week, the index gained 1.4%.
The Dow lost almost 200 points on Friday, and the S&P 500 and Nasdaq dropped 0.7% and 1%, respectively, after the US unemployment report showed larger-than-expected payroll gains and wage growth, which will keep the Fed aggressively tightening monetary policy. The Labor Department's closely watched report showed that the US economy added 528K payrolls in July 2022, well above Wall Street expectations. The data followed hawkish comments from several Fed policymakers, which made a policy pivot even more elusive as the central bank sought to cool an overheating economy. The Dow and the S&P 500 indexes are now on track to snap a two-week rally, while the tech-heavy Nasdaq has outperformed so far by adding roughly 1.5%.
