Asian equity markets took a hit after Meta Platforms Inc.’s disappointing outlook sent shockwaves through the industry, raising concerns about the sustainability of the bull market in equities.
Equity benchmarks in Japan and South Korea dropped, while futures for Hong Kong also declined. Australian financial markets were closed for a holiday, adding to the subdued trading atmosphere. The yen traded in a narrow range after weakening beyond 155 per dollar for the first time in more than three decades, prompting speculation about potential intervention.
The $250 billion exchange-traded fund tracking the Nasdaq 100 suffered losses after the close of regular US trading as Meta Platforms, the parent company of Facebook, tumbled more than 15%. The company’s projection of second-quarter sales below analyst expectations and increased spending estimates for the year rattled investors.
Sophie Lund-Yates, an analyst at Hargreaves Lansdown Plc, commented, “Meta’s resources are vast, but not infinite. The language around spending plans has become bolder once more, and this could be what’s spooking markets.”
In Japan, the yen depreciated to as low as 155.37 per dollar, marking a significant milestone not seen since June 1990. Traders are closely monitoring any comments from officials in Tokyo that suggest a higher state of readiness for intervention.
Meanwhile, South Korea’s SK Hynix Inc. expressed optimism about a full recovery in the memory market, driven by increased demand for AI technology. The chipmaker reported its fastest pace of revenue expansion since at least 2010.
In the broader markets, oil prices held a modest decline, with a risk-off tone prevailing despite a drawdown in US stockpiles. Gold prices remained relatively stable.
The earnings report from Meta Platforms showed revenue of $36.5 billion in the first quarter, a more than 27% increase from the same period a year ago. Profit more than doubled to $12.4 billion, slightly beating analyst expectations.
Tejas Dessai at Global X ETFs encouraged investors to focus on the company’s strengths, noting that its fundamentals continue to show strength. However, Mark Hackett at Nationwide cautioned that the advantage of tech megacaps like Meta Platforms may decrease in the coming years, signaling a potential shift in market dynamics.
Traders have been adjusting their expectations for Federal Reserve rate cuts amid resilient economic data. Economists predict that GDP likely cooled to around 2.5% in the first quarter, with inflationary pressures still looming.
Key events to watch this week include US GDP data, earnings reports from companies like Microsoft and Alphabet, as well as Japan’s rate decision and economic forecasts.
Overall, the market sentiment remains cautious as investors navigate the impact of Meta Platforms’ outlook on the broader equity landscape.
