Asian stocks mixed even as S&P500 nears new record high
Asian stocks are taking their cues from the mixed close in US stocks, with the S&P 500 just 16 points or 0.5% away from a new all-time record close on Friday.
The ongoing earnings season has given equities another leg up, even as global uncertainties persist. Despite some bellwether companies missing estimates, many of the reported results show US companies faring better than expected amidst global trade tensions and the downward pressures on the world’s economy.
Despite disappointing earnings from the likes of Caterpillar and Texas Instruments, these two companies are seen as a proxy for the ongoing trade war, however, more than 80% of corporates announcing earnings so far have managed to beat estimates. If this ratio continues for the rest of the Q3 earnings season and better developments are seen on the US-China trade front, there’s a high chance of US indices breaking above July’s record highs. However, noting that the downside risks are still on the table, markets may not be fully comfortable with diving head first into riskier assets, until there is greater certainty surrounding the US-China trade conflict and Brexit. markets question the justification for keeping the Pound elevated. Still, at least investors can draw relief from the diminished chances of a no-deal Brexit, which puts a sturdier floor below the Pound. taking up the reigns next Friday, policy continuity is set to frame investors’ outlook at the central bank, with the Eurozone economy still contending with subdued economic growth.
Many hope that Lagarde has more clout in pushing governments, given her political background, especially if data next month shows the region has fallen into recession.
Germany’s manufacturing slump, as evidenced further by Thursday’s IHS Markit manufacturing PMI, continues to be a drag on the EU economy. Unless policymakers step in with substantial fiscal stimulus measures, barring a rapid dissipation of external headwinds, the outlook for the economy and the bloc’s currency remains tilted to the downside.