SYDNEY (Reuters) – Asian equities rallied on Monday as tensions on the Korean peninsula eased and earnings rose in the first quarter. However, some investors wondered if this sunny outlook could worsen in the near future.
MSCI's Asia-Pacific's broadest index outside Japan .MIAPJ0000PUS climbed 0, 1 percent after a jump of more than 1 percent on Friday. The index is ready to end the month flat after two consecutive losses.
The South Korean KOSPI Index .KS11 gained 0.5 percent and is expected to exceed 2 percent at the end of April with a record gain by Samsung ( 005930.KS ) and a spectacularly successful inter-Korean summit. Australia's benchmark index added 0.2 percent, while New Zealand shares .NZ50 were a touch softer.
Liquidity was lacking on Monday, with Japan, China and India on vacation and much of Asia closing on Tuesday.
Overall, equities continue to be supported by strong corporate earnings in the first quarter. More than half of the Wall Street S & P 500 .SPX companies have reported and 79.4 percent have fallen short of consensus estimates.
Analysts now expect earnings growth of 24.6 percent, more than twice the forecasts at the beginning of the year and strong tax cuts.
But investors have become increasingly nervous as the US Federal Reserve signals faster rate hikes this year and the European Central Bank will soon end its generous bond-buying program.
"The key issue for 2018 remains to what extent the favorable environment will persist," said Jacob Mitchell, chief investment officer of the Australian investment boutique Antipodes, which manages A $ 7 billion in assets.
Global equity markets had a dream in 2017, helped by the first synchronous world growth in decades and loose monetary policy in most of the developed world.
"We believe that the unusually favorable combination of Goldilocks from accelerating growth and tenuous inflation in 2017 will not be repeated," Mitchell added.
"Instead, the normalization of interest rate policy will disrupt the rhythm with more volatile and less resilient markets."
In fact, the MSCI Asia ex-Japan index in 2018 has been almost unchanged, compared with more than 13 percent in the same period last year.
E-Mini futures for the S & P 500 ESc1 rose 0.1 percent after Wall Street was barely changed on Friday after a turbulent week. [.N]
Investors will focus this week on a stream of data from the US, including later-day consumer spending, the Fed's monetary policy decision on Wednesday and a working report on Friday.
Separately, a delegation of US officials, including Finance Minister Steven Mnuchin and President Donald Trump's leading economic and trade advisers – Larry Kudlow, Robert Lighthizer and Peter Navarro – are expected to negotiate for trade in China this week.
Relations between the US and China had begun earlier this year, when Trump announced tough tariffs on some Chinese imports that had provided a response from Beijing.
Political tensions on the Korean peninsula are also showing signs of easing last week, following a historic summit meeting between North Korean leader Kim Jong Un and South Korean President Moon Jae-in, as they pledged "complete denuclearization."
U.S. US Secretary of State Mike Pompeo said on Sunday that he told Kim that the North Korean head of state would have to agree to "irreversible" steps to abandon nuclear weapons if he wanted to reach a deal with Trump.
Sterling was struck another blow in Asia when the British Home Secretary resigned, leading to significant problems for Prime Minister Theresa May's administration.
The pound last bought £ 1.3772 = D4, down 0.9 percent on Friday, as disappointing economic growth data challenged expectations that the Bank of England would raise interest rates in May. A few weeks ago, it was as high as $ 1,4377.
The US dollar was slightly firmer after the retreat on Friday, with its index over 91 major competitors at 91,587.
The euro also fell slightly to EUR 1.2120, while the dollar rose to JPY 109.15 against the yen, although it was a hard time to break the resistance at 109.50.
The oil price rebounded from the recent highs with Brent crude oil futures LCOc1 by 30 cents to $ 74.35 a barrel, while the US crude oil CLc1 lost 10 cents to $ 68.00.
spot gold was 0.2 percent firmer at $ 1,324.3 an ounce.
Reporting by Swati Pandey and Wayne Cole; Editing by Eric Meijer