Asian Stocks Poised to Track US Gains; Oil Drops: Markets Wrap

Asian shares are poised to follow the lead of another strong performance on Wall Street, with stocks hitting fresh all-time highs. Oil dropped as concerns eased about Israel attacking Iranian energy facilities.

(Bloomberg) — Asian shares are poised to follow the lead of another strong performance on Wall Street, with stocks hitting fresh all-time highs. Oil dropped as concerns eased about Israel attacking Iranian energy facilities.

Futures show Tokyo stocks rising more that 1% after resuming trading from a holiday on Monday, while smaller gains are expected in Sydney and Hong Kong. With earnings reports poised to drive US sentiment this week, the S&P 500 rose almost 1%, notching another record — its 46th this year. That’s a hint investors are not deterred by the reduced forecasts for third-quarter results and are instead betting on positive surprises.

Oil dropped almost 3% in early trading Tuesday, after the Washington Post reported that Israel doesn’t plan on striking Iranian oil or nuclear facilities. That extended losses from Monday after China’s highly anticipated Finance Ministry weekend briefing lacked specific new incentives to boost consumption in the world’s biggest crude importer.

The S&P 500 hovered near 5,860 on Monday amid thin trading volume. The Nasdaq 100 added 0.8%. The Dow Jones Industrial Average climbed 0.5%. Nvidia Corp. led gains in megacaps, Apple Inc. gained on a bullish analyst call and Tesla Inc. rebounded after last week’s plunge. Goldman Sachs Group Inc. and Citigroup Inc. advanced ahead of results.

Treasury futures were marginally lower while cash trading was closed for a US holiday. The dollar edged up. Bitcoin jumped 5%.

Strategists are predicting S&P 500 firms will post their weakest results in the past four quarters, with just a 4.3% increase compared with a year ago, Bloomberg Intelligence data show. Meantime, corporate guidance implies a jump of about 16%. That solid outlook suggests companies could easily beat market expectations.

“Wall Street has underestimated Corporate America lately,” said Callie Cox at Ritholtz Wealth Management. “This environment is tough to get a read on, and I don’t blame anybody who’s approaching this rally with a bit of skepticism. We still think the biggest – and most expensive – risk here is to miss a rebound and an eventual rally higher.”

Chinese stocks overcame a bout of early volatility to post their biggest gain in a week on Monday, suggesting that investors are hopeful the government will deliver on its promise of more fiscal support. 

Still, there’s more signs of economic weakness as a report Monday showed export growth in September unexpectedly climbed just 2.4% in dollar terms from a year earlier to the lowest level since May. A gauge of US-listed Chinese shares fell more than 2% overnight.

Meanwhile, in a show of hot demand for Japan’s biggest listing in six years, Tokyo Metro Co.’s initial public offering has raised ¥348.6 billion ($2.3 billion) after the company priced shares at the top of the marketed range, people familiar with the matter said.

In the US, earnings season unofficially kicked off on Friday, led by financial bellwethers JPMorgan Chase & Co. and Wells Fargo & Co. On top of other big banks reporting this week, traders will be paying close attention to results from key companies like Netflix Inc. and JB Hunt Transport Services Inc.

An initial round of third-quarter financial results last week showed Corporate America is benefitting from lower rates early into the Federal Reserve’s easing cycle, according to Bank of America Corp. strategists.

Easing rates pressure was seen in a surge in debt underwriting, mortgage applications and refinancing activity, as well as signs of a bottom in manufacturing, the BofA team including Ohsung Kwon and Savita Subramanian said.

To Solita Marcelli at UBS Global Wealth Management, third-quarter results should confirm that large-cap corporate profit growth is solid against a resilient macro backdrop.

“We maintain our positive outlook for US equities, supported by healthy economic and profit growth, the Fed’s easing cycle, and AI’s growth story,” she said. “While valuations are high, we think they are reasonable against the favorable backdrop.”

Marcelli reiterated her S&P 500 price target of 6,200 by June 2025, and continues to like “AI beneficiaries and quality stocks.”

Corporate Highlights:

• B. Riley Financial Inc., the money-losing broker-dealer and investment firm looking to cut debt, agreed to sell a majority stake in its Great American Holdings business to funds managed by Oaktree Capital Management LP.
• Adobe Inc. unveiled artificial intelligence tools that can create and modify videos, joining Big Tech companies and startups in trying to capitalize on demand for the emerging technology.
• Caterpillar Inc. was downgraded to underweight by Morgan Stanley, which flagged a disconnect between fundamentals and share price.
• Amgen Inc. was downgraded to hold at Truist Securities, which said upcoming obesity data is already priced into the stock.
• SoFi Technologies Inc. reached a deal to use $2 billion of Fortress Investment Group LLC funds for the origination of personal loans.
• Elliott Investment Management has called for a special shareholder meeting at Southwest Airlines Co., officially kicking off the firm’s first US proxy fight since 2017.

Key events this week:

• Eurozone industrial production, Tuesday
• US Empire Manufacturing index, Tuesday
• Goldman Sachs, Bank of America, Citigroup earnings, Tuesday
• Donald Trump will be interviewed by Bloomberg editor-in-chief John Micklethwait at the Economic Club of Chicago, Tuesday
• Fed’s Mary Daly, Adriana Kugler speak, Tuesday
• Morgan Stanley earnings, Wednesday
• ECB rate decision, Thursday
• US retail sales, jobless claims, industrial production, Thursday
• Fed’s Austan Goolsbee speaks, Thursday
• China GDP, Friday
• US housing starts, Friday
• Fed’s Christopher Waller, Neel Kashkari speak, Friday

Some of the main moves in markets: 

Stocks

• Hang Seng futures rose 0.1% as of 7:14 a.m. Tokyo time
• S&P/ASX 200 futures rose 0.4%
• Nikkei 225 futures rose 1.4%

Currencies

• The euro was little changed at $1.0908
• The British pound was little changed at $1.3055
• The Japanese yen was little changed at 149.77 per dollar
• The offshore yuan was unchanged at 7.0956 per dollar

Cryptocurrencies

• Bitcoin was little changed at $65,963.29
• Ether was little changed at $2,621.80

Bonds

• The yield on 10-year Treasuries was little changed at 4.10%

Commodities

• Spot gold was little changed
• West Texas Intermediate crude fell 2.7% to $71.87 a barrel

This story was produced with the assistance of Bloomberg Automation.