A sense of calm returned to Asia today as the China sell-off abated and investors paused for breath and reflection. Overnight, the S&P 500, NASDAQ and Dow Jones traded sideways to be almost unchanged but still at record highs ahead of heavyweight technology earnings.
China Industrial Profits rose by 66.90% (YTD) YoY for June, near consensus but lower than the May release. Profits rose across both state and private companies. The data suggests that China’s recovery continues, but the Asian giant is grappling with the same supply chain and material cost challenges the rest of the world is experiencing. The data impact will be low as investors remain transfixed on China regulatory risk.
The pause for breath produced a mixed result for Asian markets. The Nikkei 225 was 0.50% higher, while the South Korean GDP release lifted the KOSPI by 0.60%, helped by Industrial Profits remaining firm in China today.
In China itself, the Shanghai Composite was just 0.15% higher, while the CSI 300 fell by 0.35% after plummeting by 4.0% yesterday. Hong Kong was still suffering China technology and credit nerves as the Hang Seng fell by 1.0% today.
Around the region, Singapore rose 0.50% after the government hinted at a September reopening date for borders. Taipei fell 0.40%, while Kuala Lumpur and Jakarta crawled to a 0.15% gain. Bangkok fell by 0.45%, with Manila jumping 1.60% higher.
Australian markets followed Wall Street’s modest 0.25% gains, with the ASX 200 and All Ordinaries rising by 0.50%, helped by Victoria and South Australia signaling the end of their recent virus restrictions.
European markets were likely to follow regional Asia and open modestly higher once again. Still, I expect volatility to be modest as we await the Q2 earnings from Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT). Strong performances will greenlight more gains for Wall Street tonight.