SINGAPORE, RAW – Asian equities consolidated recent gains as investors’ sentiment improved amid strong results by US companies, helping stocks recover from the worst start to the year since 2016, while a resurgent euro paused ahead of US inflation data.
Markets are still alert for rate increases in both the euro zone and the United States after the European Central Bank last week was considered to have adopted a more hawkish tone.
Euro zone yields rose sharply on Monday with Italian bond prices underperforming their peers. The United States has reported stronger-than-expected jobs and earnings data.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.05 per cent to 614.6 after rising to 617.7, the highest since January 25. The benchmark is now up about three per cent from a more than one-year low of 595.99 struck on January 27.
“Much of investors’ concern is focused on the five Fed increases that markets are pricing in for 2022, and if they won’t be sufficient to contain inflation,” Seema Shah, chief strategist at Principal Global Investors, said in a note.
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“Yet, the Fed’s urgency to tighten should soon ease as the most acute economic price pressures start fading. Furthermore, while US growth has likely peaked, a recession isn’t in the cards,” she said.
Japan’s Nikkei rose 0.4 per cent, Korean stocks went up 0.7 per cent and Taiwan gained 0.6 per cent. Hong Kong stocks figured among the losers, with the Hang Seng index falling 0.7 per cent.
S&P 500 futures were steady and Nasdaq futures edged up 0.06 per cent.
The MSCI World index fell 6.2 per cent in January – the worst start to the year since 2016.
US consumer price figures for January are due on Thursday and could show core inflation accelerating to the fastest pace since 1982 at 5.9 per cent.
Major Wall Street stock indexes were mixed throughout the session on Monday before ending down as markets digested mixed quarterly results from megacaps Amazon.com Inc and Facebook owner Meta Platforms.
The Dow Jones Industrial Average ended flat, while the S&P 500 lost 0.37 per cent and the Nasdaq Composite dropped 0.6 per cent.
Of the 278 companies in the S&P 500 that have posted earnings as of Friday, 78.4 per cent reported above analysts’ expectations, according to Refinitiv data.
“Corporate profits are the strongest in decades, consumers are backed by excess savings, and gradual supply chain normalisation should provide a boost to inventories and production,” Shah of Principal Global Investors said.
The US January payrolls report on Friday showed annual growth in average hourly earnings climbed to 5.7 per cent, from 4.9 per cent, while payrolls for prior months were revised up by 709,000 to radically change the trend in hiring.
In foreign exchange markets, the euro inched down 0.1 per cent, having shot up 2.7 per cent last week in its best performance since early 2020 on the tightening expectations.
The euro has held gains but has been unable to beat resistance around $US1.1483 ($A1.6105) even as European bond yields have leapt and last bought $US1.1441 ($A1.6046).
The dollar crept 0.1 per cent higher on the yen to 115.27 and the US dollar index stayed at 95.457. Treasury yields hovered close to pandemic highs, with the benchmark 10-year yield up 1.6 basis points to 1.9358 per cent.
Oil prices eased on Tuesday ahead of talks between the United States and Iran officials, which could lead to the removal of US sanctions on Iranian oil sales.
Brent crude was last down 0.4 per cent to $US92.29 ($A129.44) a barrel after hitting a seven-year high of $US94 ($A132) on Monday.
Spot gold prices were steady at a 1-week high at $US1,822 ($A2,555) per ounce.