Investors Cautious Ahead Of Us Earnings Season, Key Chinese Economic

Asian share markets started the week on a cautious note on Monday ahead of US earnings season and a slew of Chinese economic data.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed, while Japan’s Nikkei bounced 0.8 percent after losing 1.2 percent last week.

S&P 500 futures were flat, while Nasdaq futures slipped 0.1 percent.

The main feature of the market recently has been a rotation into value stocks and away from growth, particularly technology. The S&P 500 information technology sector, which accounts for nearly 29 percent of the index, has shed 5.5 percent this year.

A holiday in the United States made for thin trading, but that did not stop Brent crude from extending its bull run toward last year’s peak of $86.70 a barrel.

With valuations still high, earnings will have to be strong to stop further losses. Overall S&P 500 earnings are expected to climb 23.1 percent this season, according to Refinitiv IBES, while the tech sector is seen up by 15.6 percent.

Companies reporting this week include Goldman Sachs, BofA, Morgan Stanley and Netflix.

The market will be spared speeches from Federal Reserve officials this week ahead of their January 25-26 policy meeting, but there has been more than enough hawkish comments to see the market almost fully price in a first rate hike for March.

There was also talk the Fed will start trimming its balance sheet earlier than previously thought, draining some of the excess liquidity from world markets.

Yields on cash 10-year Treasuries climbed to their highest in a year at 1.8 percent, while futures implied yield of 1.83 percent early on Monday.

“The implications of quantitative tightening continue to occupy markets as an earlier Fed balance sheet runoff looms,” noted analysts at Barclays.

“Meanwhile, new COVID lockdowns in China could re-aggravate global supply bottlenecks, while in both Europe and the U.S. the near-term growth outlook is now weaker and the 2022 inflation profiles higher.”

Data out of China due on Monday are expected to show retail sales and industrial output slowed further in December. The economy is forecast to have grown 1.1 percent in the fourth quarter, though the annual pace is seen slowing to 3.6% from 4.9 percent.

BEWARE THE BOJ

A Bank of Japan (BOJ) policy meeting this week will bear watching given talk it will revise up its outlook for growth and inflation, while sources told Reuters policy makers were debating how soon they could start telegraphing an eventual interest rate hike.

While a move is unlikely this year, financial markets may be under-estimating its readiness to gradually phase out its once-radical stimulus programme.

This was one reason the yen has rallied, with the dollar slipping 1.2 percent last week to last stand at 114.29 but still well above major chart support at 112.52.

The euro also gained 0.5 percent last week as the dollar eased broadly and was last changing hands at $1.1408. The dollar index was a shade firmer at 95.231, after touching a…