(Oct 7) : A record-breaking rally on Wall Street may set the tone for Asian markets as traders focus on earnings, even as elevated oil prices threaten to keep interest rates and global bond yields higher for longer.
Futures for the S&P 500 and the Nasdaq 100 Index signaled further gains after the indexes closed at all-time highs. The milestones came ahead of the start of the US earnings season next week and were driven by gains in artificial intelligence-related shares, with Nvidia Corp.’s market value approaching US$6 trillion.
That may support Asian chipmakers including Samsung Electronics Co., SK Hynix Inc. and Taiwan Semiconductor Manufacturing Co. Equity-index futures for Japan and Hong Kong pointed to modest gains, while those for South Korea and Taiwan edged lower. In a reprieve for Indonesia, FTSE Russell reaffirmed the country’s equities as an emerging market.
Elsewhere, Treasury 10-year yields fell from the highest since 2002 and a gauge of dollar strength ended lower on Tuesday.
US oil edged higher to trade near US$90 a barrel in early Asian trading. Brent settled near US$101 a barrel, after earlier dropping as much as 3.3% as traders weighed rising exports from the Middle East against increasing Iranian attacks on tankers in the Strait of Hormuz.
The outlook for Asian stocks remains upbeat, with MSCI’s Asia Pacific gauge hovering near a record as investors bet companies can weather the risks from rising interest rates and energy costs. Much of the optimism is centered on hundreds of billions of dollars in AI-related spending by tech giants, which is fueling demand for memory chips and other electronics components.
While bets on the path for global monetary policy and geopolitical developments have captured investors’ attention, a less discussed factor has been strong earnings expectations, noted Kyle Rodda at Capital.com.
Analysts expect a roughly 25% increase in third-quarter S&P 500 profits from a year earlier, according to data compiled by Bloomberg Intelligence.
“Recent economic growth data have been strong and S&P 500 earnings revision breadth has remained positive,” Goldman Sachs Group Inc. strategists led by Ben Snider wrote in a recent note. “We expect most companies will once again surpass consensus earnings estimates this quarter.”
As geopolitical fragmentation continues, most major economies are absorbing higher energy prices and tariffs better than expected, according to Tiffany Wilding and Andrew Balls at Pacific Investment Management Co.
“A booming AI investment cycle, the ability of consumers and China to absorb higher costs, and an incremental approach by central banks may help support growth while containing inflation,” they added.
uploaded by Isabelle Francis