SYDNEY–Asian share markets rallied on Monday following a much-needed bounce on Wall Street, though nerves were stretched ahead of a near-certain interest rate hike in Europe and another round of corporate earnings reports.
It is shaping up to be a fraught week for Europe as it waits anxiously to see if Russia resumes the flow of gas through the Nord Stream 1 pipeline on July 21, while Italy teeters on the brink of political turmoil should Prime Minister Mario Draghi go ahead and resign.
“If gas flows do not resume meaningfully, European gas prices will surge, prompting Germany and others to enact gas and power rationing with a deep recession all but guaranteed if this were to occur,” said Taylor Nugent, an economist at NAB.
“Our base case is that gas flows resume.”
The uncertainty will haunt the European Central Bank as it holds a policy meeting where it is likely to kick off a tightening cycle with a rise of 25 basis points.
Markets are also hanging on details of an anti-fragmentation tool intended to ease pressure on borrowing costs for the Union’s most indebted members.
Investors found some relief in Friday’s rally on Wall Street and MSCI’s broadest index of Asia-Pacific shares outside Japan added 1.4 percent, having shed 3.5 percent last week.
Japan’s Nikkei was closed for a holiday, but futures traded at 27,130 compared to a cash close of 26,788, while South Korea gained 1.7 percent.
Chinese blue chips added 1.0 percent, though Shanghai announced more districtwide coronavirus testing.
S&P 500 futures edged up 0.4 percent, while Nasdaq futures firmed 0.7 percent.
EUROSTOXX 50 futures rose 0.6 percent and FTSE futures 0.4 percent.
A who’s who of corporates report earnings will be on show this week including Goldman Sachs Group Inc, Bank of America Corp, International Business Corp, Netflix Inc, Tesla Inc and Twitter Inc.
