(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever
Bad (economic) news is good news, and good (earnings) news is also good news.
That’s the general outlook on Wall Street right now as investors continue to claw back some of this year’s losses – U.S. stocks on Monday shrugged off steep declines in Asia, especially China, to extend the bear market rally of the last two weeks.
The S&P 500 has rebounded some 9 per cent from its Oct. 13 low, laughing in the face of rising bond yields and interest rate expectations. Monday’s gains came despite recession-territory U.S. PMIs and a spike in the VIX volatility index back above 30.
Investors have plenty of other reasons to be cautious too: liquidity and financial stability concerns; political, economic and market trends in China; Japan’s policy conundrum and FX market interventions; British political and market turbulence.
The news flow from Asia, in particular, is not conducive to a ‘risk-on’ trading environment. MSCI Asia ex-Japan and China’s benchmark indexes fell to post-2020 lows on Monday, and the offshore yuan slumped to its lowest level since it was introduced in 2010.
You wouldn’t bet against Asian and U.S. stock markets continuing to diverge.
One relative bright spot, however, could be U.S. earnings. So far, almost one-fifth of S&P 500 companies have reported. Of those, 75 per cent have beat expectations, according to Refinitiv data.
The Q3 reporting season goes into overdrive this week with results from tech giants and tech-heavy firms including Twitter, Microsoft, Alphabet, Apple, Meta Platforms and Amazon.com all on the docket.
If the Wall Street rebound is to continue and ripple to Asia, these results in particular could be crucial. (Graphic: Tesla, Nasdaq & FAANGs, https://fingfx.thomsonreuters.com/gfx/mkt/zjvqjqejypx/FAANGS.jpg)
Key developments that could provide more direction to markets on Tuesday:
China FDI (September)
South Korea consumer sentiment (October)
U.S. house prices (August)
U.S. consumer confidence (October)
U.S. earnings
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