SYDNEY- Asian shares rallied on Monday as hopes for less aggressive US rate hikes and the opening of China’s borders bolstered the outlook for the global economy.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.5 percent to a five-month top, with South Korean shares gaining 2.1 percent.
Chinese blue chips added 0.4 percent, while Hong Kong shares .HSI climbed 1.4 percent. China’s yuan also firmed to its highest since mid-August.
Japan’s Nikkei was closed for a holiday but futures were trading at 26,230, compared with a cash close on Friday of 25,973.
S&P 500 futures added 0.2 percent and Nasdaq futures 0.3 percent. EUROSTOXX 50 futures added 0.5 percent, while FTSE futures FFIc1 firmed 0.4 percent.
Earnings season kicks off this week with the major US banks, with the Street fearing no year-on-year growth at all in overall earnings.
“Excluding Energy, S&P 500 EPS (earnings per share) is expected to fall 5 percent, driven by 134 bp of margin compression,” wrote analysts at Goldman Sachs. “Entering reporting season, earnings revision sentiment is negative relative to history.
“We expect further downward revisions to consensus 2023 EPS forecasts,” they added.
“China reopening is one upside risk to 2023 EPS, but margin pressures, taxes, and recession present greater downside risks.”
A sign of the strain came from reports Goldman would start cutting thousands of jobs across the firm from Wednesday, as it prepares for a tough economic environment.
In Asia, Beijing has now opened borders that had been all but shut since the start of the COVID-19 pandemic, allowing a surge in traffic across the nation.
Bank of America analyst Winnie Wu expects China’s economy, the second-largest economy in the world, to benefit from a cyclical upturn in 2023 and anticipates market upside from both multiple expansion and 10 percent EPS growth. — Reuters
