- Nikkei bounces back from 7-month low
- Strong US earnings support super-priced Wall St
- Fed to meet in a data-rich week
SYDNEY, July 26 (Reuters) – Asian stocks struggled to recover on Monday as super-strong US corporate earnings sucked emerging market funds into Wall Street, where records fell almost daily.
More than a third of the S&P 500 is expected to release quarterly results this week, with Facebook Inc (FB.O), Tesla Inc (TSLA.O), Apple Inc (AAPL.O), Alphabet Inc (GOOGL) headlining .O), Microsoft Corp (MSFT.O) and Amazon.com (AMZN.O).
With just over a fifth of the S&P 500 having published, 88% of companies have exceeded the consensus of analysts’ expectations. This is one of the main reasons why global fund managers invested more than $ 900 billion in US funds in the first half of 2021.
Oliver Jones, senior market economist at Capital Economics, noted that U.S. profits are expected to be about 50% higher in 2023 than they were the year immediately before the pandemic, far more than expected in the most other big savings.
“With such optimism, it seems likely to us that the tailwind of rising earnings forecasts, which have supported the stock market so much over the past year, will fade,” he warned.
Nasdaq futures were up 0.1% at the start of trading, while S&P 500 futures were flat.
As funds flock to Wall Street, Asian markets have been widely snubbed. The largest MSCI index for Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) has been trending sideways since March and only rose a fraction on Monday.
Japan’s Nikkei (.N225) rebounded 1.6% at the start of trading, but it was a seven-month low. South Korea <> KS11> is doing a bit better on demand for tech stocks, but little changed on Monday.
The week is also rich in US data which should underline the outperformance of the economy. Second-quarter gross domestic product is expected to post 8.6% annualized growth, while the Fed’s preferred measure of core inflation is expected to rise 3.7% in June.
The Federal Reserve is meeting on Wednesday and, while no policy changes are expected, President Jerome Powell will likely be in a hurry to clarify what “substantial further progress” on jobs would look like.
“The main message of the Fed Powell Chairman’s post-meeting press conference should be consistent with his testimony to Congress in mid-July when he reported no rush for the cut,” Cummins said. , NatWest Markets economist.
“However, it will be a clear reminder to market participants that the taper countdown has officially started.”
So far, the bond market has been remarkably serene about the prospect of a possible decline, with US 10-year bond yields falling for four consecutive weeks to stand at 1.28%.
The decline did little to undermine the dollar, in part because European yields fell further amid expectations of continued massive bond purchases from the European Central Bank.
The single currency has been trending down since June and hit a four-month low at $ 1.1750 last week. It was last at $ 1.1770 and was at risk of testing its 2021 low of $ 1.1702.
The dollar also appreciated slightly against the yen to reach 110.57, but remains below its recent high of 111.62. The decline in the euro took the dollar index to 92,891, far from its May low of 89,533.
The rising dollar offset lower bond yields to leave gold around $ 1,800 an ounce.
Oil prices have fared better as demand for betting remains strong as the global economy gradually opens up and supply remains tight.
Brent was trading 23 cents firmer at $ 74.33 a barrel, while US crude rose 20 cents to $ 72.27.
Editing by Sam Holmes
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