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Asia morning update

A packed week kick-started with overt optimism seen on Wall Street, particularly for the tech sector.

US Wall street
Source: Bloomberg

Asian markets look set to follow in Wall Street’s footsteps, with many returning from the Labour Day holiday.

Softer than expected US Q1 GDP from last Friday and President Donald Trump’s latest comment on breaking up of the big banks appear to have dealt little impact upon the markets. Meanwhile, positive earnings expectations from the tech sector tipped the comprehensive S&P 500 index into gains and the tech-heavy NASDAQ index to record high at the start of the week.

An examination of the earnings reports thus far finds the technology cluster showing the strongest performance in earnings surprise as a whole. Of the 50% companies that have reported earnings, 92% were seen surprising on the upside in terms of earnings and 64% when comparing sales. The week would see the likes of Apple and Facebook reporting Q1 earnings.

Besides earnings, Tuesday also marks the start to the US Federal Open Market Committee (FOMC) meeting. Although no change in monetary policy has been expected for May’s meeting, the post meeting statement would still be one to watch for on sentiment surrounding recent data weakness.

Certainly, the market has been exhibiting a sense of calm despite the series of events we have seen of late and earnings reports would most likely be the one to thank. The CBOE volatility index, Wall Street’s fear gauge, was last seen plummeting to a 10-year low at 10.05, showing the extent of optimism. Moving ahead, May could be a more trying month with the absence of earnings coming through.

Closer to home, the concern have been rightly paid to China’s official manufacturing PMI figures which arrived weaker than expected at 51.2. April’s figure had significantly moderated from the prior 51.8 and the market’s median estimate at 51.7. Nevertheless, this remain the 9th consecutive month in which we have seen PMI thrive in expansionary territory and the private Caixin gauge would be the one to watch for in the day for regional markets.

Positive leads from Wall Street look set to power Asian markets at the start of the week. Broadly higher April Nikkei manufacturing PMIs in the Asian region are also expected to support prices in the day. Early movers in the region including the KOSPI 200 and Nikkei 225 were last seen clocking strong gains and the local Singapore STI is expected to follow. Notably, DBS Group Holdings Q1 2017 earnings arrived this morning, trending in line with UOB with a surprise on the upside for earnings, boding well for the local index. Non-performing loans have held steady at 1.4%, likely to ease some of the concern for investors.

For the day ahead, watch China’s Caixin PMI, RBA’s monetary policy decision and Indonesia’s inflation update. The local Singapore market will also find April’s PMI figures released after market’s close.

Yesterday: S&P 500 +0.17%; DJIA -0.13%; DAX -0.05%; FTSE -0.46%

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