(Bloomberg) -- Equities in Asia rose after Wall Street closed higher, helped along by a rotation out of megacap tech and into economically sensitive shares including smaller companies.
Shares in Japan and Australia rose. An index of US-listed Chinese companies rose almost 1% Wednesday in a sign the country’s equities may bounce after two daily declines, as investors digest support measures for the country’s second-largest economy.
Gains for Asian stocks followed a 0.5% advance for the S&P 500 on Wednesday. The Russell 2000 index of small-caps rose to the highest level in almost three years, while the Nasdaq 100 lagged, climbing just 0.1%. Nvidia Corp. ran against the grain of muted tech performances, climbing 3.1% to buoy the Magnificent Seven group of megacap tech stocks.
The moves signal a shift out of the world’s largest tech companies that have soared on the back of the artificial intelligence boom and into other stocks that benefit in benign economic conditions.
“Investors may be looking to rotate away from large technology companies, which are widely owned and may have fewer clear catalysts going forward,” said David Russell at TradeStation. “With the election coming and the economy returning to balance, the long-awaited rotation away from megacaps to everything else could finally be at hand.”
Data due Friday is set to show China’s economy expanded 4.5% in the third quarter from a year ago, according to economists surveyed by Bloomberg. That would mark its weakest pace in six quarters.
Chinese President Xi Jinping has called on government officials to make every effort in the final quarter to help the country meet its annual growth target of around 5%. However, after a series of press conferences this month in which policymakers offered no details of fresh stimulus, fears are now mounting that efforts may not be enough to revive growth. The next key event is a press briefing by the housing minister on Thursday.
Elsewhere, Australian bond yields rose after the country’s unemployment rate fell to 4.1% in September; economists polled by Bloomberg anticipated it would hold steady. The 10-year Treasury yield inched higher 4%, and a dollar index remained near its highest levels since early August.
The yen was little changed early Thursday after declining against the greenback in the prior session. Japanese exports suffered a surprise decline in September.
Taiwan Semiconductor Manufacturing Co.’s earnings will be closely watched on Thursday for any signs of slowing demand for chips, after ASML Holding NV offered surprisingly dour order numbers and cut its 2025 revenue forecast earlier in the week.
US Earnings
Traders also continued to wade through a raft of US corporate earnings. Morgan Stanley climbed 6.5% as traders and bankers joined the rest of their Wall Street rivals in posting better-than-expected revenue, fueling a 32% profit jump for the third quarter. United Airlines Holdings Inc. jumped 12% as earnings beat estimates.
The S&P 500 has already set 46 closing records this year, and according to the trading desk at Goldman Sachs Group Inc., that rally is primed to extend into the final months of 2024.
Scott Rubner, a managing director for global markets and tactical specialist at the bank, estimates the US stock benchmark can finish the year “well north of 6,000.” According to his calculations of data going back to 1928, the historical median of S&P 500 returns from Oct. 15 to Dec. 31 is 5.17%. In election years median returns are even higher, just over 7%, implying a year-end level of 6,270.
“The equity market selloff is canceled, and a year-end rally is starting to resonate with clients shifting from hedging from the left-tail to the right-tail as institutional investors are getting forced into the market right now,” Rubner wrote in a note to clients Tuesday. Professional investors are growing concerned about materially underperforming their benchmarks, he added.
In commodities, West Texas Intermediate rose after falling for a fourth day Wednesday. Gold was steady after two sessions of advances. Bitcoin was little changed Thursday after rising 1.7% to touch the highest level since July on Wednesday.
Key events this week:
- ECB rate decision, Thursday
- US retail sales, jobless claims, industrial production, Thursday
- Fed’s Austan Goolsbee speaks, Thursday
- China GDP, Friday
- US housing starts, Friday
- Fed’s Christopher Waller, Neel Kashkari speak, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 9:51 a.m. Tokyo time
- Japan’s Topix rose 0.3%
- Australia’s S&P/ASX 200 rose 0.9%
- Euro Stoxx 50 futures rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0861
- The Japanese yen was little changed at 149.51 per dollar
- The offshore yuan was little changed at 7.1309 per dollar
Cryptocurrencies
- Bitcoin rose 0.2% to $67,764.02
- Ether was little changed at $2,618.6
Bonds
- The yield on 10-year Treasuries advanced two basis points to 4.03%
- Japan’s 10-year yield was unchanged at 0.950%
- Australia’s 10-year yield advanced five basis points to 4.26%
Commodities
- West Texas Intermediate crude rose 0.7% to $70.85 a barrel
- Spot gold rose 0.1% to $2,677.03 an ounce
This story was produced with the assistance of Bloomberg Automation.
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