Asia: Stocks to rise as earnings outweigh bank woes

EQUITIES in Asia were primed to advance on Monday (May 1) after robust corporate earnings boosted Wall Street at the end of last week as investors awaited news of a bid for First Republic Bank.

Stock futures for Japan and Australia edged higher. Contracts for the Hang Seng Index also advanced, although Hong Kong will be closed for trading, alongside China, Singapore and many countries in Europe to observe May 1 holidays.

US futures were broadly flat in early Asian trading after the S&P 500 rose 0.8 per cent on Friday to advance for two consecutive weeks for the first time in a month. The benchmark also posted back-to-back monthly gains for the first time in five months. The CBOE Volatility Index fell below 16 points for the first time since November 2021 as solid corporate earnings boosted sentiment.

The future of First Republic Bank weighed over markets, however. Regulators had asked a group of banks including JPMorgan Chase & Co and PNC Financial Services Group to submit bids for the embattled lender by midday on Sunday in Washington. Should none materialise, US authorities have the option of taking ownership of the bank.

Currency markets were stable in early Asian trading. Bitcoin traded just below US$30,000, holding on to its stellar run this year.

A Friday rally in Treasuries pushed yields across the curve lower. The yield on the 10-year note fell 10 basis points, the biggest one-day drop in more than a month, to 3.42 per cent.

Interest rate decisions will be in focus this week. The Federal Reserve is expected to increase borrowing costs 25 basis points to a range of 5 per cent to 5.25 per cent, a level not seen since 2007. The European Central Bank is also expected to raise its key lending rates by 25 basis points. The Reserve Bank of Australia is forecast to keep interest rates on hold when it meets on Tuesday.

“Earnings season is showing the demand in the market, which is a key engine of inflation, is still quite robust,” Hebe Chen, an analyst with IG Markets, said in an interview on Bloomberg Television. The Fed must also play down the chances for rates to fall later this year, “potentially putting a cap on the unrealistic expectations for a rate cut”, she said.

Apple headlines another busy week of earnings reports that includes Advanced Micro Devices, Ford Motor, Qualcomm, Coinbase Global, Block and Peloton Interactive.

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Here are some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 7 31 am Tokyo time. The S&P 500 rose 0.8 per cent on Friday
• Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.7 per cent on Friday
• Hang Seng futures rose 1 per cent
• Nikkei 225 futures rose 0.7 per cent
• S&P/ASX 200 futures rose 0.7 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.1 per cent on Friday
• The euro was little changed at US$1.1017
• The Japanese yen was little changed at 136.26 per dollar
• The offshore yuan was little changed at 6.9296 per dollar

Cryptocurrencies

• Bitcoin rose 0.3 per cent to US$29,424.56
• Ether rose 0.1 per cent to US$1,895.9

Bonds

• The yield on 10-year Treasuries declined 10 basis points to 3.42 per cent on Friday
• Australia’s 10-year yield declined three basis points to 3.34 per cent on Friday

Commodities

• West Texas Intermediate crude fell 0.2 per cent to US$76.59 a barrel
• Spot gold rose 0.1 per cent to US$1,990 an ounce

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