ASIAN STOCKS TRACK US REBOUND ON PROFIT OPTIMISM

Asian stocks rose after US shares rebounded from a $2 trillion selloff on optimism big tech leaders will announce hefty profits this week.

Benchmark indexes advanced in Japan and South Korea, while futures in Hong Kong also pointed to gains. Contracts for US equities were little changed after the S&P 500 topped 5,000 — halting a six-day rout — while the Nasdaq 100 rose 1%, with Nvidia Corp. leading gains in big tech. Apple Inc. was named a top pick for 2024 at Bank of America Corp. on optimism over its upcoming results.

Investors are waiting to see if earnings will meet the lofty expectations for artificial intelligence this week when about 180 companies in the S&P 500 — representing over 40% of the gauge’s market capitalization — are due to report their results. Stakes are high for the “Magnificent Seven” megacaps, whose profits are forecast to rise nearly 40% from a year ago, according to Bloomberg Intelligence. The focus on earnings comes after a rout fueled by geopolitical fears and signals the Federal Reserve will be in no rush to cut rates.

“Concerns about rising interest rates, stubborn inflation, and geopolitical risks aren’t going anywhere — but this week, the tech sector may be ‘calling the shots’,” said Chris Larkin at E*Trade from Morgan Stanley.

Treasuries were flat in Asia ahead of a flurry of bond auctions that will test investors’ appetite after yields hit the highest in 2024. Australian bonds gained in early trading.

Oil held a modest decline as investors were encouraged after Middle East tensions eased. Gold edged higher after tumbling 2.7% on Monday as haven demand waned.

In Asia, focus returns to China’s role as a major lender to developing nations amid a report the head of its central bank wants creditors engaged in debt restructurings to agree on how to fairly share the burden of relief.

Elsewhere, the yen traded near 34-year low versus the dollar, keeping alive speculation Japanese authorities will step up verbal intervention or take action to support its beleaguered currency.

Strategists at Wall Street’s top banks are split on whether companies can deliver on robust forecasts. While Morgan Stanley’s Michael Wilson said he expects profit growth to improve as the economy strengthens, his counterpart at JPMorgan Chase & Co., Mislav Matejka, argues that hot inflation, a stronger dollar and geopolitical tensions are clouding the outlook.

Nearly two-thirds of 409 respondents in Bloomberg’s Markets Live Pulse survey said they expect earnings to give the US equity benchmark a boost. That’s the highest vote of confidence for profits since the poll began asking the question in October 2022.

The challenge to S&P 500 returns this earnings season is that companies will have to produce earnings — and outlooks — that support the already elevated multiples, according to Megan Horneman at Verdence Capital Advisors.

Indeed, the stakes are high for America’s technology behemoths to start delivering on artificial intelligence promises with their earnings poised to decelerate, according to Bank of America Corp. strategists.

Microsoft Corp., Alphabet Inc., Meta Platforms Inc. and Tesla Inc. report results this week — kicking off earnings for the so-called Magnificent Seven. With AI seen as the key to future profits, its contributions to the earnings mix is a focus for traders, a BofA team including Ohsung Kwon and Savita Subramanian said.

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2024-04-23T01:15:49Z dg43tfdfdgfd