Asia Open: Mixed start to the week, yen strengthens on Japan GDP surprise

Major US indices eyeing record territory

Major US indices closed off last week on a positive note, with the bears caught on the wrong foot amid a wave of volatility-driven headlines. Hotter-than-expected US inflation was largely shrugged off, as market participants took comfort in the details, with several components suggesting limited pass-through to the core Personal Consumption Expenditures (PCE) inflation.

A temporary delay in US tariff risks and renewed hopes for a Ukraine-Russia ceasefire added to the optimism as well, with some signs that Trump may be more open to negotiations and lowering the prospects of trade escalation. Even Friday’s surprise contraction in US retail sales had little lasting impact on the markets, with temporary weather conditions perceived to distort the underlying trend and leaving further data on watch ahead.

The S&P 500 is trading just shy of a new record, and buyers will most likely be eyeing for a confirmation this week. Tech remains the area of strength, with strong bullish momentum presented in Nvidia and Apple – both adding close to 7% for the week. Notably, the US dollar was dragged to a new two-month low. Further unwinding of the Trump trade and recalibration in Federal Reserve (Fed)’s rate expectations may give USD crosses some room for a breather.

Asia Open

The Asian session kickstarts the week on a mixed tone, with the Nikkei -0.80%, ASX -0.66% and KOSPI +0.31% at the time of writing. The lead-up to the upcoming US market holiday has translated to a general drift across US equity futures this morning, and may leave some market participants on the sidelines for now, leading to lower trading volume.

Japanese equities saw a bout of volatility following the release of its preliminary gross domestic product (GDP) data. A higher-than-expected read reflects strength in exports and capital spending, but private consumption remains sluggish, with the net effect translating to a stronger Japanese yen this morning. Stronger growth may reinforce expectations for the Bank of Japan (BoJ) to push through with further hikes, while the slowdown in private consumption growth may be addressed by the prospects of higher wages ahead.

The USD/JPY has extended its recent retracement further, with the formation of a new lower high last week and the resistance in its daily relative strength index (RSI) off its midline presenting a bearish bias. Sellers may likely to eye for a push below its early-February low next, which may pave the way towards the December 2024 low at the 148.78 level.

Alibaba’s results on watch this week

No doubt Chinese equities have remained the bright spot, benefitting lately from renewed capital inflows as the launch of DeepSeek kept Chinese companies relevant on the artificial intelligence (AI) race, while trade dynamics with the US has still been manageable for now. The Nasdaq Golden Dragon China Index added another 2.3% last Friday, with equity futures suggesting positive momentum to resume into the new week. Buying-on-dips remain the strategy here for the Hang Seng Tech Index, with the higher-highs-higher-lows formation on the weekly chart potentially reflecting a longer-term trend reversal as valuation are being revisited.

Alibaba’s results will be on watch this week, which may offer a reality check for its 60% rally over the past month. With extended overbought conditions, the results may potentially offer a perfect excuse for some cool-off, especially with share price trading at the upper range of its years-long consolidation pattern. But with weekly moving average convergence/divergence (MACD) trading in positive territory since March 2023, any higher low will remain on watch in the event of any retracement and the broader reversal to the upside should continue.