US stock futures rallied on a sharp rise in sales forecasts from chipmaker Nvidia Corp., which fueled gains for Asian tech stocks without lifting broader equities benchmarks in the region.
Shares fell in Japan, South Korea, Australia and China fell. Declines for Hong Kong’s Hang Seng Index placed the benchmark on course for a third day of declines greater than 1%.
Taiwanese stocks rose, bucking the trend in Asia as Taiwan Semiconductor Manufacturing Co. — which supplies Nvidia — climbed about 2.5%. South Korean tech bellwethers Samsung Electronics Co. and SK Hynix Inc. advanced.
The weakness in Asia reflected cross winds as investors weigh the risk of the US defaulting on its debt, the chances of another rate hike by the Federal Reserve, central bank meetings in Seoul and Jakarta, and signs of softness in the Chinese economy.
Gold erased an initial gain and the dollar reversed course to rise against the yen after spiking higher when Fitch placed US ratings on watch negative. The ratings agency said the decision reflected the partisan dispute over the debt ceiling, while noting that it still expects a resolution to head off default.
Nasdaq 100 futures rallied 1.4%, holding most of their early gains even after the Fitch news. The advance followed a 0.5% drop in the underlying index Wednesday amid concerns over the debt-ceiling impasse and uncertainty over the Fed’s next policy decision. Contracts for the S&P 500 jumped 0.3%.
Nvidia shares rose by around 25% in after-hours trading following the chipmaker’s report that booming demand for artificial intelligence processors would fuel revenue growth. The action indicated a gain of around $200 billion to its market value.
“The company couldn’t have been more positive about what it’s seeing,” said Adam Crisafulli, analyst and founder of Vital Knowledge media. “In addition to the huge revenue tailwind hitting the company from AI, Nvidia’s gross margins have now largely recovered to prior peak levels.”
Meanwhile, the Bank of Korea kept rates unchanged at 3.5% for a third consecutive meeting, as expected, against the backdrop of persistent inflation and slowing growth. Bank Indonesia is also expected to hold rates when it meets.
“The substantial surge witnessed in Nvidia holds the potential to illuminate the subdued sentiment across Asian markets,” said Hebe Chen, an analyst with IG Markets. “However, the prevailing pessimism regarding the debt limit crisis and monetary policy would likely persist in the background.”
Major currencies held to tight ranges and a gauge of dollar strength rose 0.1%. The new Zealand dollar added to recent losses after the central bank indicated Wednesday that its rate-hike cycle has peaked.
Selling in US government debt pushed 10-year Treasury yield five basis points higher on Wednesday to a level not seen since the depths of the banking crisis in March. Yields advanced one more basis point to 3.75% on Thursday.
Higher short-dated Treasury yields Wednesday came as investors demanded a higher premium on debt coming due after June 1 — the date Treasury Secretary Janet Yellen has said the US was likely to begin missing debt payments. Those maturing June 6 rose above 6.6% on Wednesday while those maturing May 30 are yielding around 3%.
JPMorgan Chase & Co. Chief Economist Michael Feroli said the odds of US debt talks going past June 1 are 25% and rising. However, Nomura’s Charlie McElligott said he believes a “positive outcome” is getting closer, with traders selling in waves of profit-taking ahead of the Treasury secretary’s deadline.
In addition to the debt talks, investors are weighing minutes from the Fed’s meeting in early May that showed policymakers leaning toward pausing interest-rate increases in June amid heightened uncertainty over the outlook. Yet the minutes also suggested they aren’t yet ready to call an end to their battle against stubborn inflation.
Other economic headwinds stemming from tighter credit conditions are also not yet reflected in market prices, according to Kim Strand, senior vice president, Franklin Templeton Investment Solutions.
“Our base case is still a recession,” Strand said in an interview on Bloomberg Television. “The rate hike cycle could be over but there is still a lot left in terms of macro economic uncertainty and how that ripples through the economy.”
Key events this week:
Fed issues minutes of May 2-3 policy meeting, Wednesday
Bank of England Governor Andrew Bailey speaks, Wednesday
US initial jobless claims, GDP, Thursday
Interest rate decisions in Turkey, South Africa, Indonesia, South Korea, Thursday
Tokyo CPI, Friday
US consumer income, wholesale inventories, durable goods, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.3% as of 10:48 a.m. Tokyo time. The S&P 500 fell 0.7%
Nasdaq 100 futures rose 1.4%. The Nasdaq 100 fell 0.5%
Japan’s Topix fell 0.2%
Australia’s S&P/ASX 200 fell 0.8%
Hong Kong’s Hang Seng fell 1.1%
The Shanghai Composite was little changed
Euro Stoxx 50 futures were little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro was little changed at $1.0745
The Japanese yen fell 0.1% to 139.63 per dollar
The offshore yuan fell 0.2% to 7.0782 per dollar
The Australian dollar fell 0.2% to $0.6532
Cryptocurrencies
Bitcoin fell 1.1% to $26,122.13
Ether fell 1.5% to $1,778.42
Bonds
The yield on 10-year Treasuries was little changed at 3.75%
Japan’s 10-year yield advanced 1.5 basis points to 0.42%
Australia’s 10-year yield advanced three basis points to 3.68%
Commodities
West Texas Intermediate crude fell 0.3% to $74.14 a barrel
Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Isabelle Lee and Georgina McKay.
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