Asia markets extend gains on rate cut optimism; RBA decision in focus

China stocks have staged such a strong rally after a protracted slump for the past few years that they’re beating even the S&P 500 so far this year.

That breakout has come after a deep and lengthy decline in Chinese markets, as they lost nearly $5 trillion in three years. Investors were bearish as a result of the property debt crisis, slowing growth and other factors.

But is the bounce back sustainable? Here’s what Wall Street and other analysts say, and what to buy in the market.

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— Weizhen Tan

More than three-quarters of the way through earnings season, and it is another strong showing for the “Magnificent Seven.” Of the six that have already reported, only Tesla has missed estimates.

According to earnings data provider LSEG, aggregate earnings for the Magnificent Seven are expected to soar 49% year over year. In contrast, the other 493 S&P 500 stocks are on pace to see just flat earnings growth this season, up 0.4%.

The Magnificent Seven’s strong growth has been fueled by particularly robust performance from Meta Platforms, Alphabet and Amazon over the past couple of weeks.

But no stock will have more of an effect than Nvidia, which reports results on May 22. The chipmaker’s earnings are expected to surge more than five times last year’s levels. Nvidia alone is expected to make up more than one-third of the 7% earnings growth the entire S&P 500 is now seeing this season.

— Robert Hum

Some investors may have sniffed out a buy-the-dip opportunity in precious metals, according to Deutsche Bank.

Analyst Michael Hsueh said in a note to clients Monday that platinum funds have seen a recent uptick in inflows after platinum prices have drifted well below that of gold.

“Platinum is one step closer to gold compared with palladium from an investment standpoint. One piece of the argument may depend on a relative value rationale versus gold; XPTXAU reached a new record low in April,” Hsueh said.

The Abrdn Physical Platinum Shares ETF (PPLT) has seen about $34 million in flows over the past month, according to FactSet. Its price has fallen 3.9% this year, compared to a gain of 11.4% for SPDR Gold Shares (GLD).

— Jesse Pound

Strategas’ sentiment toward the China market has made a marked pivot from “no way” last year, to “this may be more of a strategic turn,” according to Strategas’ head of macro research and technical strategy Chris Verrone.

“Time will reveal all, but the big momentum in the China indices is not to be ignored and is spilling to the EEM which has been among the first of the bellwether global indices to break out (along with the U.K. FTSE 100),” Verrone said in a Monday note.

An upturn in China could further strengthen the bull case for industrial metals, particularly copper, Verrone added.

The benchmark Shanghai Shenzhen CSI 300 Index is up around 1.5% in May.

— Hakyung Kim