Soft Trade in Asia; Investors Prepping for US Earnings Results

Asia Pacific shares are trading mostly lower on Monday on a day when the only major event so far is the debut of a Nasdaq-style technology board on the Shanghai Stock Exchange. The first batch of trading on the new technology innovation board, known as the STAR Market, included shares of 25 companies – ranging from chip-makers to biotech firms.

At 06:40 GMT, China’s Shanghai Index is trading 2895.64, down 28.56 or -0.98% and Australia’s S&P/ASX 200 Index is at 6691.20, down 9.10 or -0.14%.

Japan’s Nikkei 225 Index is trading 21416.79, down 50.20 or -0.23%, South Korea’s KOSPI is at 2095.28, up 0.92 or +0.04% and Hong Kong’s Hang Seng Index is trading 28510.87, down 254.53 or -0.88%.

Earnings to Drive Price Action

Trading in Asia is likely to remain muted the rest of the session as investors prepare for another week of U.S. earnings reports. Key reports this week include Facebook (FB), Alphabet (GOOGL) and Amazon (AMZN). This week will be busy for investors as about 25% of the S&P 500 is slated to report quarterly results.

More than 15% of S&P 500 companies have reported thus far. Of those companies, 79% have posted a better-than-expected profit, according to FactSet data. Entering the earnings season, analysts expected S&P 500 earnings to have fallen by around 3%, according to FactSet data.

Central Banks Move to Forefront

Stock market investors are looking for central banks to either cut rates or keep settings accommodative, starting with the European Central Bank (ECB) on July 25, followed by the Bank of Japan on July 30 and the U.S. Federal Reserve on July 31.

On Friday, investors ramped up bets for an ECB interest rate cut. Money markets are now pricing in a roughly 60% chance of a 10 basis point rate cut, versus a 40% chance early last week. In the U.S., traders are pricing in a 100% chance of a 25-basis point rate cut. Last Friday, the chances of a 50-basis point rate cut tumbled from 71% to 18.5%.

Bank of Japan Governor Haruhiko Kuroda said on Thursday the central bank will scrutinize economic developments until the last minute in deciding policy next week, suggesting that whether to stand pat or increase stimulus will be a close call. As US-China trade relations continue to damage global growth, an increasing number of market players expect the BOJ’s next move to be a loosening of monetary policy with some betting on action as early as the next rate review on July 29-30.