By Ankur Banerjee
SINGAPORE, Oct 28 (Reuters) – Asian shares posted a three-day gain on Friday as investors grappled with mixed earnings reports and looked to next week’s Federal Reserve meeting for signs of a pivot. whether or not there is an increase in rate. on the table.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.56 percent to 433.92, but touched a two-and-a-half-year low of 427.42 opened on Monday. The index is down 4% for the month and 31% for the year.
European stock futures indicated that stocks were set to fall, with Eurostoxx 50 futures down 0.75 percent, German DAX futures down 0.71 percent and FTSE futures down 0.61 percent.
Disappointing earnings reports have added to the gloom, with Amazon.com the latest tech behemoth to face a hefty fine from investors after predicting lower sales.
Resilient corporate earnings have been a bright spot in another bad year, although recent poor results raise doubts about how long this can last.
“The concern is increasingly related to earnings,” said Frank Benzimra, head of Asia equity strategy at Societe Generale, adding that rising interest rates remain part of the concern.
“It’s earnings and the risk of recession that is hurting the market.”
In the currency market, the Japanese yen fluctuated between losses and gains against the dollar after the Bank of Japan kept its policy steady and kept interest rates very low but raised its inflation target.
The widely expected move from the BOJ comes after the European Central Bank raised interest rates again on Thursday, but said “significant” progress had been made in its effort to combat rising inflation.
Investors are now turning their attention to next week’s Federal Reserve meeting. While a 75-basis-point hike at the end of its Nov. 1-2 policy meeting is almost certain, the likelihood of a smaller, 50-basis-point hike in December was 55%, according to CME’s FedWatch tool.
Societe Generale’s Benzimra said, “I don’t think there will be a surprise here (in terms of raising the rate), but it will be more about the message that the Fed will give.”
The ECB’s less hawkish comments added to expectations that central banks may slow the pace of monetary tightening, especially after the Bank of Canada surprised markets by delivering a smaller-than-expected rate cut on Wednesday.
Markets have resumed trading on a Fed pivot, but this is defined as a move in smaller steps, rather than a “proper” path from hikes to cuts, according to Citi strategists, noting that a true pause is yet to come. it’s a long time away.
In China, stocks fell 0.8%, with Hong Kong’s Hang Seng Index down 2.3%, after a wild sell-off on Monday capped a rough week. Dismal industrial earnings figures and expanding COVID-19 outbreaks have also weighed on sentiment.
Elsewhere, Japan’s Nikkei fell 0.45%, while Australia’s S&P/ASX 200 Index lost 0.87%.
The yen was up 0.01 percent against the greenback at $146.27, while the dollar index was down 0.109 percent.
The euro is up 0.17% at $0.9979, threatening to pull back from balance after dropping more than 1% overnight following the ECB’s vote.
Oil prices fell on Friday after China, the world’s biggest crude importer, extended its COVID-19 restrictions but was poised to post a weekly gain on supply concerns.
(Editing by Jacqueline Wong and Ana Nicolaci da Costa)
