Asian Investors Jittery Ahead of US Earnings Reports; Looking for More Stimulus from PBOC

Due to the uncertainty caused by the US-China trade dispute, and the possibility that trade tensions may escalate again, some investors are sitting on the sidelines, hoping the People’s Bank of China steps in to introduce more fiscal stimulus in the months ahead to steady the economy and to prevent it from slowing too quickly.
James Hyerczyk
Asian Shares

The major Asia Pacific stock markets are trading mixed on Tuesday after giving back earlier gains. The markets are being underpinned by dovish Reserve Bank of Australia monetary policy meeting minutes. Gains are being capped, however, by worries ahead of another day of U.S. earnings reports. Mixed economic data from China on Monday is also weighing on investor demand for stocks in the region.

At 06:14 GMT, Japan’s Nikkei 225 Index is trading 21556.00, down 129.90 or -0.60%. South Korea’s KOSPI Index is at 2088.47, up 5.99 or +0.29% and Hong Kong’s Hang Seng Index is at 28618.33, up 63.45 or +0.22%.

China’s Shanghai Index is trading 2936.16, down 6.03 or -0.20 and Australia’s S&P/ASX 200 Index is at 6646.10, down 6.90 or -0.10.

RBA Monetary Policy Minutes

The RBA monetary policy minutes, released earlier in the session, showed Australia’s central bank would cut interest rates again “if needed” to support employment, wages growth and inflation, having already eased twice since June to a record low of 1%.

The minutes of the Reserve Bank of Australia’s (RBA) July policy meeting showed its board decided that cutting rates by another quarter-point, together with a similar move the previous month, would help speed up the economy.

Global Investors on Edge Ahead of Earnings Reports

The outlook for this earnings season is bleak with analysts expecting S&P 500 earnings to have fallen by 3% in the second quarter, according to FactSet data. Therefore, the trade has been a little tentative as of late despite the major U.S. indexes straddling all-time highs.

Earnings season kicked off on Monday with Citigroup reporting second-quarter numbers that topped analyst expectations. On Tuesday, banking giants Goldman Sachs, J.P. Morgan Chase, Wells Fargo and Charles Schwab all set to report earnings before the bell, along with other major corporations such as Johnson & Johnson and Domino’s Pizza. Both United Airlines and CSX are due to report after the bell.

Asian Investors Focusing on China’s Next Move

On Monday, China released second-quarter growth figures that showed its economy slowed to 6.2%, the weakest rate in at least 27 years, as its trade dispute with the United States took its toll. This was in line with expectations, but lower that the 6.4% year-on-year growth in the first quarter of 2019.

Due to the uncertainty caused by the US-China trade dispute, and the possibility that trade tensions may escalate again, some investors are sitting on the sidelines, hoping the People’s Bank of China steps in to introduce more fiscal stimulus in the months ahead to steady the economy and to prevent it from slowing too quickly.

The move would provide support for Chinese equities.

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