SYDNEY :Asian share markets pushed higher on Monday amid optimism on earnings as reporting season gets into full swing, while a reading on U.S. inflation is expected to be no more than a speed bump on the way to further rate cuts.
Data on the Chinese economy are forecast to show growth slowed to 4.8 per cent in the third quarter, while retail sales and industrial output should underline the need for stimulus as policymakers convene to discuss the latest Five-Year Plan.
Figures out in the United States on Friday, and despite the government shutdown, are expected to show core inflation held at 3.1 per cent in September, but should not trouble markets given the Federal Reserve has not pushed back against pricing for cuts.
“Chair Powell has highlighted the importance of signs of a weakening job market in the Fed’s policy considerations,” said Michael Feroli, head of U.S. economics at JPMorgan. “That confirmed widely held expectations that the FOMC will cut rates again at its next meeting in just over two weeks.”
Futures are fully priced for a quarter-point easing this month, and another in December, with rates seen reaching 3.0 per cent by the middle of next year.
Japan’s Nikkei led Asia higher with a rise of 1.5 per cent encouraged by news the Liberal Democratic Party and the Japan Innovation Party have agreed to form a coalition government, setting the stage for the country’s first female prime minister.
Analysts assume Sanae Takaichi would be pro-stimulus and against further hikes in interest rates, a negative for the yen and bonds but a plus for equities.
Shares in South Korea added 0.6 per cent, while MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 0.1 per cent.
For Wall Street, S&P 500 futures were steady, while Nasdaq futures edged up 0.1 per cent on expectations for upbeat earnings this week.
HIGH EXPECTATIONS FOR EARNINGS
Reports include Tesla, Ford, GM, Netflix, Procter & Gamble and Coca-Cola, along with aerospace and defence giant RTX and tech stalwarts IBM and Intel.
The UK also has major banks reporting this week while software giant SAP will make a splash in Germany.
EUROSTOXX 50 futures edged up 0.4 per cent, while DAX futures firmed 0.5 per cent and FTSE futures 0.1 per cent.
S&P 500 companies overall are expected to have increased earnings by 8.8 per cent in the third quarter from a year earlier, according to LSEG IBES, and strong results will be needed to justify the market’s lofty valuations.
The prospect of a series of Fed rate cuts has underpinned bonds, with 10-year yields falling almost 14 basis points last week to currently stand at 4.011 per cent.
The slide in yields has pressured the dollar against European and higher-yielding currencies, with the euro at $1.1656 having edged up 0.3 per cent last week despite a surprise credit downgrade of France.
The yen had its own problems as investors have scaled back pricing for a Bank of Japan rate hike this month to just 22 per cent, with a move in December put at 50-50.
The dollar was up 0.2 per cent at 150.92 yen, while the euro made similar gains to 175.89. The dollar index was flat at 98.543.
In commodity markets, gold remained in high demand after jumping almost 6 per cent last week to as far as $4,378.69. The metal was trading at $4,245 an ounce, with $4,200 now acting as chart support.
“On a three-year horizon, we believe that there is more room for gold prices to rise, eventually reaching a target of $5,000 an ounce in 2028 due to a structural change in demand for the metal by investors and central banks,” said Lorenzo Portelli, head of cross-asset strategy at Amundi Investment Institute.
Oil prices continued to be weighed by ample supplies as OPEC+ keeps raising its output.
Brent was flat at $61.28 a barrel, while U.S. crude held at $57.57 per barrel.
