Futures markets have forecast a healthy 0.6% rise on the ASX 200 today, but the lack of detail in China’s latest stimulus plans may drag things down.
The futures rise was priced in after Wall Street powered ahead to record closes on the S&P 500 and Dow to end the week.
The S&P500 gained 0.6%, the blue-chip Dow put on 1.0% while the Nasdaq was up a more modest 0.3%.
For the week the S&P 500 and Nasdaq both gained 1.1%, while Dow did marginally better, up 1.2%.
Friday’s moves were supported by better-than-expected results from JP Morgan Chase (+4.4%), Wells Fargo (+5.5%) and Black Rock (+3.6%), with the world’s biggest asset reporting its funds under management had hit a record for the third consecutive quarter.
That sentiment may continue with the likes of Citi, Morgan Stanley, Goldman Sachs and Bank of America reporting this week.
Head of multi-asset strategy at UBS Asset Management Evan Brown said the results were a good start to earnings season.
“When financials do well, this is what a soft landing looks like,” Mr Brown told Reuters.
“It’s a positive overall sign for the economy and sets a positive tone for earnings releases in other industries in the next few weeks.”
However, a few hours later on the other side of the planet, things were looking somewhat more problematic in the world’s second-largest economy.
Firstly, Chinese inflation data released over the weekend hardly shows an economy driven by robust demand – CPI slowed further to 0.4% over the year, while producers’ prices are going backwards fast.
The PPI was down 2.8% YoY, worse than expected and a significant deterioration on the 1.8% fall recorded in the previous month.
But a larger anxiety for the markets, in the short-term at least, was the lack of detail in the highly anticipated release of a new Chinese fiscal package.
The news conference hosted by China’s Finance Minister Lan Fo’an was long rhetoric, short detail.
Mr Lan reiterated Beijing’s broad plans to revive the ailing economy, and made promises of significant increases to government debt and support for consumers and the property sector, but didn’t detail how this would be achieved, or more importantly how much cash was being loaded into the fiscal bazooka.
Investment manager at Shanghai QiuYang Capital, Huang Yan echoed the disappointment of many in the investment game noting, “The strength of the announced fiscal stimulus plan is weaker than expected.”
“There’s no timetable, no amount, no details of how the money will be spent.”
“If that’s what we have in terms of fiscal policies, the stock market bull run could run out of steam,” Mr Huang said.
The first test for those sentiments is just hours away, with the ASX likely to be the proverbial canary in the Chinese coalmine.
In the US, inflation came in slightly hotter than expected, but the market is tipping there is still room for the Fed to continue to cut rates.
US Treasury yields dipped a tad, which flowed through to the Australian dollar strengthening a tad.
Oil eased 0.5% on Friday but gained 1% over the week as Middle East tensions simmered away.
Gold gained 1% on Friday, supported by slightly lower US Treasury yields and the safe-haven demand remaining solid.
