Asian shares, Aussie dollar climb on trade, earnings optimism
TOKYO: Shares in Asia rallied and the Australian dollar hit an eight-month high on Thursday as optimism over earnings and trade supported demand for higher yielding assets.
Tokyo's broad Topix gauge of shares hit an all-time high, following new records on Wall Street overnight, after a trade pact between Japan and the U.S. stoked speculation more deals would appear soon to head off sweeping tariffs. Nasdaq and S&P futures rose after results by Google parent Alphabet beat estimates to kick off the "Magnificent Seven" earnings season.
The U.S. has also reached deals with the Philippines and Indonesia and an agreement with the European Union is also expected.
"Worst case concerns about tariffs in the U.S. are probably dissipating to some degree at the moment, but nonetheless, tariffs are going up and that is a hurdle for consumers," Brian Martin, ANZ's head of G3 economics, said in a podcast.
The EU and U.S. are closing in a trade deal that would impose 15% tariffs on European imports, while waiving duties on some items, according to officials from the European Commission. Meanwhile, Treasury Secretary Scott Bessent said U.S. and Chinese officials will meet in Stockholm next week.
Second-quarter earnings season is underway in the U.S., with 23% of the companies in the S&P 500 having reported. Of those, 85% have beaten Wall Street expectations, according to LSEG data.
Results from Magnificent Seven members, whose results have powered indexes to previous peaks, are in the spotlight for guidance on spending and returns surrounding artificial intelligence (AI).
Alphabet strongly beat estimates and cited massive demand for its cloud computing services as it hiked its capital spending plans. But electric car maker Tesla posted its worst quarterly sales decline in more than a decade and profit that trailed analyst targets.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3%. Japan's Topix surged for a second day, rising 1.4% to surpass its previous all-time high reached last year.
The Australian dollar, a common proxy for risk sentiment, fetched $0.66, just off $0.6604 hit earlier, which was the highest since November 2024. The U.S. dollar dropped 0.1% to 146.38 yen.
U.S. crude climbed 0.4% to $65.5 a barrel. Spot gold was traded at $3,390.84 per ounce, up 0.1%.
In early trades, pan-region Euro Stoxx 50 futures shot up 1.3% at 5,435, while German DAX futures were up 1.3%.
U.S. stock futures, the S&P 500 e-minis, were up 0.13% and Nasdaq contracts climbed 0.4%. - Reuters
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
an hour ago
- The Star
Trump will meet South Korea's trade delegation, Seoul says
FILE PHOTO: The South Korean and American flags fly next to each other at Yongin, South Korea, August 23, 2016. Picture taken on August 23, 2016. Courtesy Ken Scar/U.S. Army/Handout via REUTERS/File Photo SEOUL (Reuters) -U.S. President Donald Trump will meet South Korea's trade delegation, South Korea's presidential office said on Thursday, as top officials from Seoul are in Washington to cut a last-minute deal on U.S. tariffs. South Korean Finance Minister Koo Yun-cheol, Industry Minister Kim Jung-kwan and Minister for Trade Yeo Han-koo met U.S. Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer on Wednesday, according to the finance ministry. Industry and trade ministers have been in Washington since last week to reach a deal before August 1, a deadline set by Trump for 25% tariffs to kick in against South Korea, a major U.S. ally and powerhouse exporter of chips, cars and steel. Pressure has been mounting on South Korea since Japan clinched a deal to cut Trump's threatened tariffs to 15% earlier this month. Top business leaders were also reported to be flying in to help lobby for a deal on U.S. tariffs. The South Korean government is negotiating with the U.S. by setting up a package of trade and offers on industrial cooperation such as in shipbuilding, chips and batteries, officials say. (Reporting by Ju-min Park; Editing by Leslie Adler and Alistair Bell)
The Star
an hour ago
- The Star
Green hydrogen bubble that BP helped burst
SYDNEY: Australia's long-held ambitions to tap its abundant renewable resources and vast uninhabited landmass to become a global green hydrogen leader is fast unravelling. Despite strong government backing and significant private sector interest, at least seven big hydrogen production projects have been delayed, scaled back or cancelled in the last year. Chief among them was BP Plc's decision last week to exit a US$36bil facility in the Pilbara region of Western Australia, which had targeted starting production this decade. Around the world, project withdrawals have accelerated as developers struggle to secure customers willing to pay a premium for the fuel. Costs remain persistently high, unlike the sharp price drops seen in solar and wind that have boosted their competitiveness. That's raised concerns about the feasibility of using renewable energy to produce hydrogen that can be stored, transported and consumed like a fossil fuel to help nations meet net-zero goals. It also looks set to make Asia's goal of cutting hard-to-tackle emissions tougher to achieve. 'This isn't just an Australian issue. There has been a slowdown in development globally, in large part because the cost hasn't come down as fast as previously forecast,' said Simon Nicholas, an analyst at the Institute for Energy Economics and Financial Analysis, a think tank that seeks to accelerate the energy transition. 'I hope that the bursting of the hydrogen hype bubble is an opportunity for a reset.' There are more green hydrogen projects under development in Australia than in any other country, with a A$225bil (US$147bil) pipeline worth of proposed projects, according to the government. But only three relatively minor plants are actually operational in the country, while most others remain in preliminary planning stages. In recent years, many of the largest energy companies have tempered plans for green hydrogen as a way to better scale up renewable electricity. Plans to produce about 1.67 million tonnes of clean hydrogen had been shelved as of the end of June, according to BloombergNEF (BNEF) – over five times the amount of actual capacity. Meanwhile, just 1.9% of planned projects have secured financing or started construction. Europe, which could become one of the world's largest consumers of green hydrogen in its push to achieve climate neutrality by mid-century, has grappled to overcome high costs, forcing some projects to be abandoned despite government support. Growth of the technology in the United States is also now in doubt after Trump's One Big Beautiful Bill significantly limited tax credits to produce the fuel. A year ago, credits were expected to help lead to about 1.2 million tonnes of annual green hydrogen production by 2030, BNEF said. 'If those incentives don't exist, I don't think this industry will exist,' said Payal Kaur, BNEF's hydrogen analyst. 'There will be cancellations if the economics don't work, and the economics don't work without the credits.' In Australia, the challenges come despite strong government support and some of the world's best natural conditions to produce hydrogen using renewables. The government has committed at least A$4bil to support the green hydrogen industry to bridge the cost gap between production and market prices. However, access to most of this funding depends on developers proving commercial viability upfront, a challenge as long-term buyers remain scarce. The Australian Renewable Energy Agency is responsible for administering the government's Hydrogen Headstart programme and has so far provided more than A$370mil to 65 renewable hydrogen projects. The agency 'appreciates that the renewable hydrogen industry is nascent and will naturally experience challenges as it scales up', it said. Fortescue Ltd and Woodside Energy Ltd said this month they would withdraw from green hydrogen plans in Australia and the United States. While those announcements are disappointing, the clean fuel is essential to manufacturing and industry in a net-zero future, Australian Energy Minister Chris Bowen said. Some green hydrogen projects are still moving forward, despite the cost challenges. In Europe, climate policies are encouraging deals, such as the one between Germany's RWE AG and TotalEnergies SE to supply hydrogen to an oil refinery. Those contracts will help to underpin new production. Elsewhere, China and India are pushing ahead in a race to produce some of the world's cheapest green hydrogen. Even so, the clean fuel remains far more expensive than fossil fuels, according to BloombergNEF. For now, demand is mainly concentrated in sectors already using hydrogen, such as oil refining and fertiliser production. China also benefits from a mature domestic supply chain of electrolysers – the machines that convert water into hydrogen and oxygen – that has helped reduce project costs. In contrast, Australia depends on European-made production units, which cost multiples of the Chinese ones, according to Nigel Rambhujun, a hydrogen analyst at Rystad Energy. Australia's hydrogen dreams, meanwhile, risk being left in tatters. The current 'situation may prompt a reassessment of sourcing strategies, with greater emphasis on evaluating alternative regions', said Shintaro Onishi, a hydrogen and ammonia analyst at Wood Mackenzie. The researcher has already incorporated a 'limited future role of Australian hydrogen exports' in its outlook, he said. — Bloomberg
The Star
an hour ago
- The Star
Retail replaces ‘smart money' as the Wall Street rocket fuel
Retail investors have been the 'primary' driver of the current rally. — Reuters Retail investors are often late to Wall Street parties, only catching the rally once it's established and 'smart money' is looking for the exit. But that doesn't appear to be the case this time around. Flow and survey data showed that – far from playing catch-up – retail investors are a key force behind the latest US equity whoosh that has been lifting the S&P 500 and Nasdaq to new highs on a near-daily basis. Retail investor participation as a share of total S&P 500 flow last week reached 12.63%, according to calculations by Goldman Sachs analysts. That's the highest share since February and well above the recent average, as retail participation has rarely exceeded 13% in the last few years, their figures showed. Retail investors have been the 'primary' driver of the current rally, Barclays equity strategists suggest, pouring more than US$50bil into global stocks over the last month. And their enthusiasm for equities is continuing to build, while institutional participation remains 'muted', Barclays strategists noted. 'Re-risking seems to be the priority for small investors as improved sentiment into second-quarter earnings, resilient macro data and US Federal Reserve cut speculation combine to outweigh still-lingering tariff threats and deficit concerns,' they wrote last week. This optimism was underscored in Morgan Stanley's latest quarterly survey of retail investors published last week. It shows 62% of those polled are now bullish US equities, and 66% reckon the US market will rise by the end of the quarter. These are both the highest levels since the survey was launched two and a half years ago. This surge in retail activity could be a positive development. At a basic level, broader participation and democratisation of the market is to be welcomed. And some analysts reckon the retail investor community has matured since 2021 when the 'meme stock' frenzy spilled over into the wider market. But current retail trading still includes some of this highly speculative, often options-related meme stock activity, with the main targets this time around being heavily shorted names like Krispy Kreme, GoPro and Kohl's. Indeed, Bank of America analysts noted, 'zero-day to expiry' options that are popular with retail investors recently accounted for more than 60% of all S&P 500 options trading activity. And the longer the rally continues, the more fears of a major correction that crushes the retail community are bound to grow. These fears are not unwarranted. The latest figures from the Financial Industry Regulatory Authority (Finra) show that margin debt in US stocks has crossed the US$1 trillion mark for the first time. This represents both retail and institutional investors' activity, but according to JP Morgan analysts, the retail cohort is predominantly responsible for the rise. Of course, investors' margin debt would be expected to rise over time in line with inflation and the underlying equity indices, particularly in a bull market. But some analysts still consider rising margin debt a sign of market froth or outright over-exuberance. On top of all this, retail investors may soon get a helping hand from Washington. A series of what Bank of America analysts call 'financial regulation policy-easing' measures are being lined up that will facilitate retail investors' trading in equities and other less-liquid markets. For example, the Trump administration is drawing up an executive order to allow retail investors to add private equity into 401K retirement funds. Media reports also suggest Finra is considering proposals to ease the 'Pattern Day Trading Rule' – which was set up to limit highly speculative trading practices – by slashing investors' minimum margin account balance requirements to US$2,000 from US$25,000 currently. Of course, with deregulation comes higher risk and lower protection for investors. But for now, retail investors are in the driver's seat and enjoying the ride. — Reuters Jamie McGeever is a columnist for Reuters. The views expressed here are the writer's own.
