Asian shares rose on Tuesday on news of China's opening of borders and hopes of a less aggressive US rate hike
Asian shares rose on Monday as hopes of a less aggressive US rate hike and China's opening of borders strengthened the outlook for the global economy.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6%, with South Korean shares rising 1.1%.
Japan's Nikkei was closed for a holiday, but futures were trading at 26,235 compared with Friday's close of 25,973. S&P 500 futures added 0.2% and Nasdaq futures added 0.3%.
Earnings season has begun this week with major US banks, with the Street fearing no year-over-year growth in overall earnings.
"Excluding energy, S&P 500 EPS (earnings per share) is expected to fall 5%, driven by 134 bp of margin compression," wrote analysts at Goldman Sachs. "Entering the reporting season, earnings revision sentiment is negative relative to history.
"We expect a further downgrade to consensus 2023 EPS forecasts," he added. "The reopening of China is an upside risk to 2023 EPS, but margin pressures, taxes and the recession present greater downside risks."
Beijing has now opened borders that were almost all closed since the start of the COVID-19 pandemic, leading to an increase in traffic across the country.
Bank of America analyst Winnie Wu expects China's economy, the world's second largest, to benefit from a cyclical boom in 2023 and expects the market to be buoyed by both multiple expansions and 10% EPS growth.
Sentiment on Wall Street was boosted last week by a benign mix of solid US payrolls gains and slower wage growth, combined with a sharp decline in service-sector activity. Markets rallied behind bets on a rate hike for the Federal Reserve.
Fed funds futures now indicate about a 25% chance of a half-point hike in February, up from about 50% a month ago.
Investors will be hypersensitive to whatever Fed Chair Jerome Powell might say at the central bank's conference in Stockholm on Tuesday.
It also magnifies the importance of US consumer price index (CPI) data on Thursday, which is forecast to ease annual inflation to a 15-month low of 6.5% and core rate to 5.7%.
NatWest Markets analyst John Briggs said: "At NatWest we have a lower CPI forecast than consensus, and if correct this would strengthen market pricing of 25 bps versus 50 bps."
“In context, this should still be viewed as a Fed that is still likely to hike a few more times and then keep rates high until inflation is guaranteed to decline – for us that means 5-5.25% funds rate."
Friday's mixed data has already The 10-year yield was down 15 basis points to 3.57%, while the U.S. The dollar was pulled down across the board.
At the start of Monday, the euro was stable at $1.0664 after bouncing from a low of $1.0482 on Friday. The dollar settled at 131.63 yen, off last week's top of 134.78, while its index was down a fraction at 103.800. Brazil's real business was yet to be done after hundreds of supporters of far-right former President Jair Bolsonaro were arrested after attacking the country's Congress, presidential palace and Supreme Court. The fall in the dollar and yields was a boon for gold, pushing it to a seven-month high of $1,870 an ounce.
Oil prices were stable at the moment after falling nearly 8% last week amid demand concerns.
Brent rose 26 cents to $78.83 a barrel, while US crude gained 30 cents to $74.07.
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