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Asia stocks rally amid China reopening


Stocks in the Asian markets rose on Monday amid hopes for less stringent rate increases by Fed in the United States. The move is also spurred by news of China’s border reopening, which improved the general look of things for the global economy.

A close observation of MSCI’s most notable index of Asia-Pacific shares outside Japan shows a 1.5% rise to a five-month best, with stocks in South Korea rising by 2.1%. Chinese blue chips gained 0.4%, while stocks in Hong Kong rose 1.4%. China’s yuan also rose to its highest since mid-August.

Japan’s Nikkei did not open because of a holiday. However, futures were going for about 26,230, compared with a cash close of 25,973 on Friday. All gains for S&P 500 futures and Nasdaq futures at 0.2% and 0.3% respectively. EUROSTOXX 50 futures gained 0.5%, while FTSE futures rose by 0.4%.

As this week marks the start of earnings season, as always the most prominent lenders in the United States are expected to lead the way. Wall Street analysts have expressed concerns that this could be a year without any year-on-year growth whatsoever in overall earnings.

“Excluding Energy, S&P 500 EPS (earnings per share) is expected to fall 5%, driven by 134 bp of margin compression,” wrote analysts at Goldman Sachs. “Entering reporting season, earnings revision sentiment is negative relative to history. We expect further downward revisions to consensus 2023 EPS forecasts,” they added.

“China reopening is one upside risk to 2023 EPS, but margin pressures, taxes, and recession present greater downside risks.”

A key indicator of the current dire circumstances comes from reports that Goldman plans a cut to jobs, starting Wednesday, that could number in the thousands across its different arms and branches, as part of efforts to gear up for stormy economic waters in the coming year.

A key change in Asia is the move by Beijing to finally reopen borders that had remained all but closed since the COVID-19 pandemic started. This has brought about a notable increase in traffic across the nation.

Winnie Wu, an analyst at Bank of America predicts that China’s economy, currently ranked second-largest among world economies, would record significant gains from the expected turbulence in the year. Wu also expects market upside from both multiple expansion and 10% EPS growth.

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