Shares cautious in Asia as earnings loom, oil slips

Shares cautious in Asia as earnings loom, oil slips SYDNEY, Oct 12 : Asian share markets got off to a cautious start on Monday as earnings season loomed as a challenge to sky-high tech valuations, while oil was choppy after strikes on shipping and airports in the Gulf. There was considerable confusion about President Donald Trump's announcement of an energy ceasefire between Ukraine and Russia, which neither side had confirmed. Trump's proposal for Russia to increase its exports of diesel was also under fire from Republican and Democratic senators as potentially illegal. Brent futures started higher but soon slipped 1.1 per cent to $103.50 a barrel, away from the recent top of $109.97, while US crude futures lost 1.2 per cent to $90.73 a barrel. South Korean stocks fell 1.1 per cent, while MSCI's broadest index of Asia-Pacific shares outside Japan was little changed. On Wall Street, S&P 500 futures edged up 0.2 per cent, while Nasdaq futures firmed 0.5 per cent. In Europe, EUROSTOXX 50 futures firmed 0.4 per cent, while DAX futures gained 0.4 per cent and FTSE futures added 0.3 per cent. Trade was thin with Japan markets shut and the US on a partial holiday ahead of the earnings season with major US banks kicking off on Tuesday. S&P 500 earnings are expected to have jumped by more than 30 per cent in the third quarter, according to LSEG IBES, though the bulk of that comes from the tech sector. My Bui, an economist at AMP, noted all the gains in the S&P 500 since mid-September had been in tech, while investors were demanding higher yields to fund the massive borrowing for AI. The US investment-grade credit default swap index, which tracks the cost of insurance against default, had also risen sharply to its highest level since the Iran war began. "Overall, wider spreads suggest investors are questioning whether AI revenues can keep pace with rising borrowing costs," added Bui. "Corporate bond issuance to fund AI capex, combined with wider high-yield spreads, will raise refinancing costs as the current wave of debt matures over the next few years." US CPI TO HEAT UP, BUT CORE COOLER The flood of corporate debt has added to pressure in sovereign markets, driving Treasury yields to 24-year highs last week and lifting the discount applied to company earnings. The market faces fresh challenges this week from US data on consumer and producer prices and retail sales. Rising energy costs are expected to lift CPI by a hefty 0.6 per cent to an annual 3.7 per cent, though the core is seen cooler at 0.2 per cent and 2.5 per cent. "Oil prices remain higher than we had assumed as shipping costs have soared, and product prices are even higher," said Bruce Kasman, head of global economics at JPMorgan. "The signals on inflation point to a sharp rebound in headline inflation that will squeeze purchasing power and a firming in core inflation that will keep central banks focused on near-term hikes." Markets imply only an 18 per cent chance of a rate rise from the Federal Reserve this month, but an 85 per cent chance of a hike in December. Investors are also wagering on hikes in the EU, Japan and UK before year end. In currency markets, the euro remained on the defensive at $1.1201 having fallen for five weeks straight amid concerns about government deficits in Europe. The dollar index held near 17-month highs at 102.25, but has stalled on the yen at 158.15 as the threat of Japanese intervention deters speculators for now. In commodity markets, non-interest-bearing gold rose 0.3 per cent to $4,206 an ounce, having managed to bounce more than 1 per cent last week. [Image text:] 1277 1260 Ke 2633 5555 -83 2621.0 BHD 2664.0 .0 SME 2704 DeNA -60. 38 2680. ES 688 2598.0 93- 15 3 INPEX CHYSVE 3378 5350 14710 3178 149 S 14690 50 RAI FAKADX 2690. 3296 9 43 729 3265 4304 G D I6ZU- 361 17 6050 1586. 29 15 19 SPE OSS #UHD PtE 1503 Sso 2720.0 5291 -6 SO 2655.0 2 1485. 250 A57HD 60 94720 2075. 6609 0 660 10 2 08 205 6040 3703 2352 2 24 - 2340 1641. o5055 IC 2 164 2200.0 333 5o 2178.0 BE ZOZO 1091.0 1079 1091 Ou 1070. E 1177. 20 861 SHIFT 637 *y- 9) 3722 +23 3736 749 3663 RSTHD 1320. 0 99E5 334 34 316 1751 05055 1767 1744 FHD 94302 787 1761 -3 744 768. 1730.0 t9HD 185 8 30 18000 7&I-HD 191 12. 190 19 SUMCO 4155 50 43 4108 5oonm O. It 77 2 2 3004 70 o5 2404. E#EY -61 99 ENG 1104. 5o 0 103 640 UBE 3196