Asian Stock Markets Cautiously Higher Ahead of European Opening

The major Asian stock indexes are trading cautiously higher on Thursday with the exception Japan’s Nikkei, which is posting a slight loss. Gains are being limited, however, by uncertainties surrounding the global economic outlook as well as the ongoing U.S.-China trade spat. Helping to underpin prices is the strong earnings driven performance in the major U.S. stock indexes on Wednesday.

At 0553 GMT, Japan’s Nikkei 225 Index is trading 20561.95, down 31.77 or -0.18%. Hong Kong’s Hang Seng Index is at 27057.09, up 48.89 or +0.18% and Australia’s S&P/ASX 200 Index is at 5865.70, up 22 or 0.38%.

In South Korea, the KOSPI Index is trading 2139.03, up 11.25 or +0.53%, while China’s Shanghai is at 2589.28, up 8.28 or +0.32%.

Shares in Japan are being pressured by yesterday’s weak Trade Balance data, which suggests the slow economy in China may be spreading to the Asian nation. A dovish outlook from the Bank of Japan may also be weighing on sentiment.

The major concern for Asian investors is U.S.-China relations which remain fragile due to concerns that the upcoming high level meeting on January 30-31 may be canceled. Investors are nervous despite White House economic advisor Larry Kudlow’s denial that an official meeting had been canceled.

U.S. Stock Market

On Wednesday, investors set aside concerns about U.S.-China trade relations and a weakening global economy to focus on earnings. This shift in investor sentiment paid off as buyers responding to strong quarterly earnings from companies like IBM, United Technologies and Procter & Gamble to send the Dow higher.

In the cash market on Wednesday, the benchmark S&P 500 Index settled at 2638.70, up 5.80 or +0.22%. The blue chip Dow Jones Industrial Average closed at 24575.62, up 171.14 or +0.70% and the tech-driven NASDAQ Composite finished at 7025.77, up 5.41 or +0.08%.

On the earnings front, Dow members IBM, United Technologies and Procter & Gamble led the charge, posting gains of 8.5 percent and more than 4.8 percent respectively.

Additionally, according to FactSet data, more than 14 percent of S&P 500 companies have released their calendar fourth-quarter results so far. Of those companies, 72.9 percent have topped earnings estimates. However, only 58.7 percent of those companies have beaten sales forecasts.

The data service went on to say that overall, profits for the companies that have reported have grown by 13.2 percent, slightly above expectations. However, FactSet noted that this number represents the slowest pace of earnings growth since the fourth quarter of 2017, when S&P 500 profits expanded by 15.5 percent.