Sydney, April 17 (BNA): Asian stocks traded cautiously as the US earnings season entered its climax this week, while a batch of Chinese data will provide insight into how the world’s second-largest economy is recovering.
Markets also saw a mood shift on the outlook for US interest rates, with ETF futures indicating an 81% chance the Fed will rise by a quarter point to 5.0-5.25% in May, Reuters reported.
Resilience in US core retail sales and a jump in inflation expectations reported on Friday caused investors to trim the amount of easing expected later this year to about 55 basis points.
The resulting caution saw MSCI’s broadest index of Asia-Pacific stocks outside Japan slipping 0.2%, while Japan’s Nikkei was flat.
EUROSTOXX 50 futures and FTSE futures contracts rose 0.2%.
Chinese blue chips added 1.0% ahead of data on retail sales, industrial production and gross domestic product due on Tuesday, as analysts believe the risks lie in an upside surprise given the recent strength in trade.
S&P 500 futures rose 0.2%, while Nasdaq futures were flat as investors awaited a series of earnings reports led by Goldman Sachs, Morgan Stanley and Bank of America.
Other big names reporting earnings include Johnson & Johnson, Netflix and Tesla.
Analysts expect the S&P 500’s first-quarter earnings to fall 5.2% from the same period a year earlier, though BofA analyst Savita Subramanian is more concerned about the outlook for 2023.
In general, we expect quarterly, but significant reductions for the full year, Bank of America warned. “Our estimate for 2023 EPS for the S&P 500 remains $200, still 9% below the consensus estimate.”
“Consumer demand has already fallen and we are now watching services,” Subramanian said.
He added that airlines, hotels and restaurants are feeling pressure from the macroeconomic slowdown, pressure (comparison periods) and discomfort from wage pressure.
In bond markets, a shift in the Fed’s outlook pushed the two-year US yield to 4.12%, after rising 12 basis points last week.
However, expectations also turned more hawkish on the European Central Bank, with German 2-year bund yields rising 32 basis points for the week in the biggest increase since September.
Futures contain 37 basis points for ECB tightening at the May meeting and 82 basis points by October.
This sea change saw the euro gain 0.8% last week, even after its slide on Friday.
So far, the single currency has settled at $1.0985 after hitting a one-year high of $1.1075 last week.
The dollar fared better against the yen as the BoJ remains committed to its ultra-easy monetary policy, at least for the time being.
The dollar held steady at 134.13 yen after rising 1.2% last week.
The dollar’s rebound removed some of the luster from gold, which returned to $2,004 an ounce, surpassing last week’s peak above $2,048.
Oil prices enjoyed four consecutive weeks of gains, helped by production cuts, and the West’s energy watchdog said global demand would rise to a record high this year on the back of a rebound in Chinese consumption.
The market strengthened, with Brent crude falling 3 cents to $86.28 a barrel, while US crude fell 5 cents to $82.47.
NAA