Asian shares, U.S. futures slip after earnings disappointment

By Alun John

HONG KONG (Reuters) – Asian shares and U.S. stock futures slipped on Friday, as Amazon and Apple quarterly earnings bucked a recent strong trend and growth and inflation fears continued to weigh.

Investors, particularly in bond and currency markets, are also worried about varied responses by central banks worldwide to rising inflation.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3% in early trading and was on track for a weekly loss of 1.3%, snapping three weeks of gains. Japan’s Nikkei reversed early losses to trade flat.

Asian shares were weighed by a fall in Nasdaq futures, which lost 0.73% as Apple Inc and Amazon Inc posted results after the close that missed expectations.

S&P 500 futures lost 0.4%.

“The background noise hasn’t changed for the last few weeks, people are still concerned around stagflation, slowing growth numbers and rising inflation, but that’s been priced more in the bond market than the equity market right now,” said Kerry Craig, global market strategist at JPMorgan Asset Management.

Strong profit outlooks earnings have been keeping equity markets afloat and inflation is more worrying for bond investors than equity investors, Craig said. “At the same time, you’re having not exactly clear messaging from the central bank responses around the world.”

Chinese shares fell less than most other markets, with local blue chips trading flat, though the Hong Kong benchmark lost 0.83%, once again weighed by mainland Chinese property stocks.

However, China Evergrande Group’s shares opened up 1.2% following news that the cash-strapped developer had made payments for an offshore bond coupon ahead of Friday’s expiry of a grace period, meeting its second dollar-bond repayment obligation this month.

Overnight the S&P 500 and Nasdaq finished at record closing levels, while the Dow Jones Industrial Average closed just shy of its highest close. [.N]

CENTRAL BANKS

As inflation concerns grow, central banks’ rate policies remain in focus.

Speculation is rising that the Reserve Bank of Australia will not be able to stick with its guidance that it likely will not raise its 0.1% cash rate until 2024, after the Reserve Bank of Australia again on Friday declined to buy bonds to defend its 0.1% target for the 2024 bond yield.

That target is central to the RBA’s case, and as uncertainty around its prospects grow, Aussie bonds have sold off sharply.

Yields on three-year bonds have surged 33 basis points this week alone to 1.08%, the largest rise since 2009. A month ago they were trading at 0.30%.

Eurozone bond yields jumped on Thursday after European Central Bank President Christine Lagarde disappointed investors’ hopes she would calm their concerns over surging inflation and rate hikes.

This sent the euro higher, gains it held in Asian hours on Friday at $1.1676.

“The European Central Bank has finally shifted its official communication on inflation from the broad denial of the summer months towards a much more balanced assessment,” said ING analysts.

Now all eyes are turning to the Federal Reserve, whose policy committee meets next week.

The dollar was weaker, largely on losses against the euro, with the dollar index, which measures the U.S. currency against other majors, at 93.381, just off its lowest level this month hit overnight.

Benchmark U.S. 10-year yields were steady at 1.5677% US10YT=RR

The gap between 5-year and 30-year yields was 79.2 basis points, having narrowed to as little as 73.4 basis points overnight, its tightest since March 2020, due to heightened expectation of a rate hike by the Federal Reserve next year.

Oil was steady with Brent crude flat at $82.72 a barrel, though on track for its first weekly fall in eight weeks [O/R]

Spot gold was also flat at $1,797 an ounce.

(Reporting by Alun John; Editing by William Mallard)

By Alun John

HONG KONG (Reuters) – Asian shares and U.S. stock futures slipped on Friday, as Amazon and Apple quarterly earnings bucked a recent strong trend and growth and inflation fears continued to weigh.

Investors, particularly in bond and currency markets, are also worried about varied responses by central banks worldwide to rising inflation.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3% in early trading and was on track for a weekly loss of 1.3%, snapping three weeks of gains. Japan’s Nikkei reversed early losses to trade flat.

Asian shares were weighed by a fall in Nasdaq futures, which lost 0.73% as Apple Inc and Amazon Inc posted results after the close that missed expectations.

S&P 500 futures lost 0.4%.

“The background noise hasn’t changed for the last few weeks, people are still concerned around stagflation, slowing growth numbers and rising inflation, but that’s been priced more in the bond market than the equity market right now,” said Kerry Craig, global market strategist at JPMorgan Asset Management.

Strong profit outlooks earnings have been keeping equity markets afloat and inflation is more worrying for bond investors than equity investors, Craig said. “At the same time, you’re having not exactly clear messaging from the central bank responses around the world.”

Chinese shares fell less than most other markets, with local blue chips trading flat, though the Hong Kong benchmark lost 0.83%, once again weighed by mainland Chinese property stocks.

However, China Evergrande Group’s shares opened up 1.2% following news that the cash-strapped developer had made payments for an offshore bond coupon ahead of Friday’s expiry of a grace period, meeting its second dollar-bond repayment obligation this month.

Overnight the S&P 500 and Nasdaq finished at record closing levels, while the Dow Jones Industrial Average closed just shy of its highest close. [.N]

CENTRAL BANKS

As inflation concerns grow, central banks’ rate policies remain in focus.

Speculation is rising that the Reserve Bank of Australia will not be able to stick with its guidance that it likely will not raise its 0.1% cash rate until 2024, after the Reserve Bank of Australia again on Friday declined to buy bonds to defend its 0.1% target for the 2024 bond yield.

That target is central to the RBA’s case, and as uncertainty around its prospects grow, Aussie bonds have sold off sharply.

Yields on three-year bonds have surged 33 basis points this week alone to 1.08%, the largest rise since 2009. A month ago they were trading at 0.30%.

Eurozone bond yields jumped on Thursday after European Central Bank President Christine Lagarde disappointed investors’ hopes she would calm their concerns over surging inflation and rate hikes.

This sent the euro higher, gains it held in Asian hours on Friday at $1.1676.

“The European Central Bank has finally shifted its official communication on inflation from the broad denial of the summer months towards a much more balanced assessment,” said ING analysts.

Now all eyes are turning to the Federal Reserve, whose policy committee meets next week.

The dollar was weaker, largely on losses against the euro, with the dollar index, which measures the U.S. currency against other majors, at 93.381, just off its lowest level this month hit overnight.

Benchmark U.S. 10-year yields were steady at 1.5677% US10YT=RR

The gap between 5-year and 30-year yields was 79.2 basis points, having narrowed to as little as 73.4 basis points overnight, its tightest since March 2020, due to heightened expectation of a rate hike by the Federal Reserve next year.

Oil was steady with Brent crude flat at $82.72 a barrel, though on track for its first weekly fall in eight weeks [O/R]

Spot gold was also flat at $1,797 an ounce.

(Reporting by Alun John; Editing by William Mallard)