Asia stocks are poised to track Wall Street higher amid diplomatic efforts to prevent the Israel-Hamas war from expanding into a regional conflict.
Shares in Australia advanced on Tuesday while futures for benchmarks in Hong Kong and Japan pointed to gains. Contracts for US equities were little changed in early Asian trading.
The S&P 500 added 1.1% on Monday, with traders also gearing up for a raft of earnings reports. Australian bonds retreated following Treasuries after 10-year yields climbed nine basis points to 4.7%.
Bitcoin pared gains after surging as much as 10% as BlackRock said its application for an exchange-traded fund that invests directly in the cryptocurrency is still under review. The dollar steadied while the kiwi slipped after the nation’s inflation slowed more than economists expected. Oil gained in early Asia trading after sliding in its previous session.
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Wall Street’s haven bid waned, with President Joe Biden considering a trip to Israel as part of a push to prevent the war from spreading. Secretary of State Antony Blinken also returned to Israel to meet Prime Minister Benjamin Netanyahu, after talks with Arab governments. Russian President Vladimir Putin held a call with the leaders of Egypt, Syria, Iran and the Palestinian Authority, and the Kremlin said there was a “unanimous opinion” on the need for a cease-fire. He spoke separately with Netanyahu.
“The price action doesn’t reflect an improvement in investors’ outlook for the Israeli conflict, rather the absence of a significant escalation,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets.
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Aside from geopolitics, traders will also be focused on corporate results this week.
The outlook for earnings is weakening and could remain subdued, according to strategists from Morgan Stanley to JPMorgan Chase & Co.
As the reporting season kicks off, Morgan Stanley’s Michael Wilson said earnings revisions breadth — referring to the number of stocks seeing upgrades versus downgrades — for the S&P 500 has fallen sharply over the past couple of weeks. Citigroup Inc.’s index of earnings revisions shows downgrades have outpaced upgrades for four straight weeks ahead of the reporting season. JPMorgan strategist Mislav Matejka expects this to continue.
Yet stock price reactions show the reporting season is “off to a good start,” with Russell 1000 firms that beat estimates outperforming at the second-highest rate in the past year and a half, according to RBC Capital Markets strategists.
Big Tech
Investors looking to earnings season for a dose of good news are hanging their hopes on a familiar group: Big Tech.
The five biggest companies in the S&P 500 — Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc. and Nvidia Corp. — account for about a quarter of the benchmark’s market capitalization. Their earnings are projected to jump 34% from a year earlier on average, according to analyst estimates compiled by Bloomberg Intelligence.
In economic news, a measure of New York state factory activity contracted in October, reflecting a pullback in demand. Federal Reserve Bank of Philadelphia President Patrick Harker repeated comments he made last week asserting the central bank can hold its benchmark rate steady as long as there is not a sharp turn in the economic data.
Key events this week:
- Chinese President Xi Jinping hosts world leaders at the Belt and Road Initiative forum from Tuesday to Wednesday, with Russian President Vladimir Putin expected to attend
- Joint European Central Bank/IMF policy and research conference, Tuesday
- Germany ZEW survey expectations, Tuesday
- UK jobless claims, unemployment, Tuesday
- US retail sales, business inventories, industrial production, Tuesday
- Goldman Sachs, Bank of America earnings, Tuesday
- New York Fed President John Williams moderates discussion, while Richmond Fed President Tom Barkin speaks at a separate event, Tuesday
- Reserve Bank of Australia Governor Michele Bullock speaks, Wednesday
- China GDP, retail sales, industrial production, Wednesday
- UK CPI, Wednesday
- Eurozone CPI, Wednesday
- Morgan Stanley, Netflix, Tesla earnings, Wednesday
- Federal Reserve issues Beige Book economic survey, Wednesday
- Philadelphia Fed President Patrick Harker and New York Fed President John Williams speak at separate events, Wednesday
- Australia unemployment, Thursday
- Japan trade, Thursday
- China property prices, Thursday
- US initial jobless claims, existing home sales, leading index, Thursday
- Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday
- Japan CPI, Friday
- China loan prime rates, Friday
- Philadelphia Fed President Patrick Harker speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 8:12 a.m. Tokyo time. The S&P 500 rose 1.1%
- Nasdaq 100 futures were little changed. The Nasdaq 100 increased 1.2%
- Hang Seng futures rose 1.1%
- Nikkei 225 futures rose 1%
- Australia’s S&P/ASX 200 rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0556
- The Japanese yen was little changed at 149.55 per dollar
- The offshore yuan was little changed at 7.3100 per dollar
- The Australian dollar was little changed at $0.6339
Cryptocurrencies
- Bitcoin rose 0.4% to $28,509.38
- Ether rose 0.9% to $1,602.99
Bonds
- Australia’s 10-year yield advanced six basis points to 4.52%
Commodities
- West Texas Intermediate crude rose 0.2% to $86.85 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
