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2020-04-27

Asia's shares move higher, BOJ's eyes ease

Image:-Stocks

Asian shares inched higher on Monday ahead of a busy earnings week and central bank meetings, the Bank of Japan (BOJ) will announce more stimulus steps with much chatter.

MSCI's broadest Asia-Pacific share index outside of Japan rose 0.1 per cent in early trading, shedding 2.6 per cent last week. Japan's Nikkei gained 1.1 per cent, while the S&P 500's E-Mini futures were down 0.4 per cent.

There is considerable speculation that the BOJ will pledge to purchase unlimited amounts of government bonds, removing the current target of 80 trillion yen per year even though it hasn't been close to achieving it.

It is also expected to raise corporate and commercial debt purchases, and maybe launch a new loan program to help firms struggling with cash flow.

Later in the week, the Federal Reserve and the European Central Bank meet, with the latter likely to do more.

"For the Fed, no further QE or interest rate developments are expected but we expect it to stress that its policies will be in place indefinitely to support the economy," analysts at ANZ wrote in a note.

"We expect the ECB to increase the size of its emergency bond buying package (PEPP) by around EUR 500 billion to EUR 1,250 trillion and continue to press for substantial fiscal stimulus." On the data front, the United States and the European Union are releasing GDP for the first quarter and an influential US manufacturing ISM survey.

This week's earnings season will be in full swing with around 173 S&P 500 companies reporting including Apple, Amazon, Facebook, Microsoft, Caterpillar, Ford, GE and Chevron.

Analysts expect first-quarter earnings to decline by 15 percent in S&P 500, with energy sector profits estimated to fall by over 60 percent, raising fears of debt defaults, layoffs and possible bankruptcies.

Bond markets remain well supported by the truly massive easing under way by major central banks, which have seen US 10-year yields trading for a week or more at around 0.6 per cent.

Due to its safe haven status as the world's most liquid currency in times of stress, the dollar has generally been a bid, though moves in recent weeks have been relatively mild.

On Friday, the dollar index hit a three-week high of 100,860 before returning to Monday's 100,250.

At $1,0816 the euro was steady, hitting a one-month low of $1,0725 on Friday, while the dollar was flat on the yen at 107.44.

Oil, Gold market Gold held at $1,723 per ounce, following last week's 2.5 per cent gain.

Oil prices looked set for yet another volatile week, falling in the last eight weeks. Last week, US crude traded below zero as demand collapsed by 30 per cent due to the pandemic, leaving more oil than could be stored.

Brent crude futures firmed 45 cents a barrel at $21.89, while US crude fell 52 cents to $16.42.