SYDNEY — Major share indexes crept higher in Asia on Monday as upbeat company earnings underpinned high valuations in the tech sector, while a crucial report on US inflation would likely set the course of the dollar and bonds.
While Japan’s stock market was closed for a holiday, futures NKc1 climbed to 42,465 and suggested the index will test its all-time high of 42,426 this week.
Trade and geopolitics loom large with a US tariff deadline on China due to expire on Tuesday amid expectations it will get extended again, while President Donald Trump and Russian leader Vladimir Putin are due to meet in Alaska on Friday to discuss Ukraine.
The main economic release will be US consumer prices on Tuesday, with analysts expecting the impact of tariffs to help nudge the core up 0.3 percent to an annual pace of 3.0 percent and away from the Federal Reserve target of 2 percent.
An upside surprise would challenge market wagers for a September rate cut, though analysts assume it would have to be a very high number given a downward turn in payrolls is now dominating the outlook.
“The tone from the Fed has shifted as a number of officials expressed concerns about growth following the July employment report,” said Bruce Kasman, chief economist at JPMorgan.
“We now expect the Fed to restart its easing cycle in September,” he added. “Recession risks are elevated at 40 percent, but we do not yet see a case for a larger than 25bp series of cuts.”
Markets imply around a 90 percent probability of a September easing, and at least one more cut by year end.
Trump’s pick for Fed governor, Stephen Miran, may or may not be in place in time to vote for a cut in September, while the choice of a new chair has broadened out to around 10 contenders.
The prospect of lower borrowing costs has supported equities, along with a run of strong earnings.
Analysts at BofA note 73 percent of companies had beaten on earnings, well above the 59 percent long run average, while 78 percent beat on revenue.
“While mentions of ‘weak demand’ ticked up and tariff concerns remain, corporate sentiment and guidance are improving,” they said in a note.
S&P 500 futures and Nasdaq futures both edged up 0.2 percent on Monday to near record highs.
Analysts were unsure what to make of a report in the Financial Times that tech majors Nvidia and AMD have agreed to give the US government 15 percent of their revenues from chip sales in China, under an arrangement to obtain export licenses for the semiconductors.
EUROSTOXX 50 futures added 0.2 percent, while FTSE futures rose 0.1 percent and DAX futures firmed 0.3 percent.
China exports deflation
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.1 percent, while South Korea was flat having bounced 2.9 percent last week.
Chinese blue chips .CSI300 added 0.3 percent after data showed consumer price inflation ticked up in July, but producer prices kept falling as the country’s massive manufacturing sector exported deflation to the rest of the world.
