Asian shares, dollar up on Fed’s optimism; earnings in focus

HONG KONG : Asian stocks tiptoed higher on Thursday and the dollar consolidated recent gains after the U.S. Federal Reserve painted a relatively bright picture of the economy, but a deepening sell-off in commodities kept gains in check.

Prospects of stronger U.S. growth in coming months lifted Asian stocks in early trade, with Japan’s Nikkei up 1.1 percent and Australian shares adding 0.8 percent. But South Korean shares fell 0.7 percent.

A dollar-denominated index of Asia-Pacific shares outside Japan rose 0.2 percent after Chinese stocks had a quiet opening.

Financial spreadbetters expect Britain’s FTSE 100 to open 0.1 percent higher, Germany’s DAX to open up 0.2 percent, and France’s CAC 40 to open up 0.1 percent.

Gains were muted before the earnings season kicks off at full throttle next week, when companies are broadly expected to post disappointing results on the back of weak economic data in recent months, particularly for trade.

Gavekal strategists noted that Asia’s trade performance had been disappointing in recent months. After a two-year post-crisis rebound in 2010-2011, export growth in the region has slowed to an annual average of 7.5 percent in U.S. dollar terms and 6 percent in volume terms this year compared to U.S. dollar growth rates of 30 percent in the years before the crisis.

“The markets still think that the world’s economy remains fragile, given a fall in Chinese shares and commodity prices. The Fed surely doesn’t want to screw up its exit from zero rates by hastily moving and hitting already fragile commodities market and the world economy,” said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.

Subdued external demand is expected to weigh on corporate earnings, with CLSA strategists expecting first-half earnings growth at Hong Kong and Chinese companies to be weak and guidance for the third quarter unlikely to be better.

Categories: Business

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