By BLOOMBERG
Asian stocks climbed, with the regional benchmark snapping a three-day decline, after Japanese Prime Minister Shinzo Abe solidified control of the government in upper house elections. Oil and metals gained as investors awaited a raft of corporate earnings in the US this week.
The MSCI Asia Pacific Index added 0.5% by 9:11 a.m. in Tokyo, after slipping 0.8% over the previous three days. Futures on the Standard & Poor’s 500 Index gained 0.1% after the gauge closed at a record July 19. Gold rose 1.3%, while copper futures rallied 0.4%. West Texas Intermediate crude was set for the highest close since March 2012. The yen gained against major currencies as Australia’s dollar jumped and South Korea’s won strengthened.
Abe’s Liberal Democratic Party and its coalition partner won a majority of upper house seats in the weekend vote, boosting his ability to carry out a plan of monetary easing, fiscal stimulus and deregulation known as Abenomics. Companies from Apple Inc to Ford Motor Co and McDonald’s Corp are set to post earnings in the US this week, with more than 70% of S&P 500 members that have already reported second- quarter results posting per-share profits that have topped analysts’ estimates, data compiled by Bloomberg show.
Shinzo Abe
“Abe’s victory in the upper house is bullish for Japanese equities and the Japanese economy as a whole, as the removal of political headwinds bolsters the government’s ability to press forward with all ‘three arrows’ of its growth strategy,” John Vail, Tokyo-based chief global strategist at Nikko Asset Management Co, which manages US$162 billion, wrote in an e-mail. “Global investors should be seriously considering Japanese equities, or they may well miss out on major opportunities. These reforms will be even stronger than promised before the election.”
Nikkei target
Australia’s S&P/ASX 200 Index rose 0.4%, led by technology stocks and utilities, while South Korea’s Kospi Index also added 0.4%. Japan’s Nikkei 225 Stock Average gained 0.8% to 14,691.64. Jefferies Group LLC raised its year- end target on the measure to 15,500, according to a report by Sean Darby, chief global equity strategist, as Abe’s victory should remove obstacles to legislation being passed as the economy recovers.
Futures on Hong Kong’s Hang Seng gauge gained 0.2%, while contracts on the Hang Seng China Enterprises Index of Chinese shares traded in the city climbed 0.4%. The People’s Bank of China ended a floor on borrowing costs set at 30% below the benchmark, according to a July 19 statement, as Group of 20 finance ministers met in Moscow.
The yen strengthened 0.9% to 99.79 per dollar, and gained 0.6% to 131.45 per euro. The so-called Aussie gained 0.6% to 92.24 US cents, set for the strongest close since July 17, and added 0.2% for a sixth day of advances against the yen.
Homes data
The won gained 0.3% to 1,118.10 per dollar, strengthening for a second day, while New Zealand’s dollar added 0.3% to 79.47 cents, set for the highest close since June 18.
The Bloomberg Dollar Index fell 0.3% today to 1,030.03, after falling 0.5% last week.
Sales of existing homes in the US probably climbed in June to the highest level since November 2009, rising to a 5.74 million annualized pace, according to the median of economists’ forecasts compiled by Bloomberg before data due today. A report July 24 will show purchases of new homes increased to 484,000 last month, the fastest pace since June 2008, according to a separate survey.
Earnings ‘focus’
“The big focus this week is sure to be the US earnings season,” Chris Green, an Auckland-based strategist at First NZ Capital Ltd, a brokerage and wealth management firm, said by phone. “There’s a lot of companies reporting and it could go a long way toward setting the tone going forward. Existing homes and new homes data is also expected to be pretty positive.”
About 53% of S&P 500 companies that have reported second-quarter results have beaten revenue projections, data compiled by Bloomberg show.
General Electric Co. surged 4.6% July 19, the highest price since 2008, after saying said its order backlog reached a record amid demand for jet engines and drilling equipment. The company reported adjusted profit from continuing operations of 36 US cents a share, exceeding the 35-cent average analyst estimate compiled by Bloomberg.
Google Inc, owner of the world’s most-used search engine, dropped 1.6% July 19 as mobile advertising crimped average prices. Microsoft Corp plunged 11%, the most since 2009, after second-quarter earnings missed projections by the biggest margin in at least a decade as demand weakens for personal computers running its Windows operating system.
Tech disappoints
Advanced Micro Devices Inc tumbled 13% after forecasting a drop in third-quarter gross margin, even as the semiconductor manufacturer predicted higher sales. The technology results followed disappointing reports from Intel Corp. last week.
Earnings from technology companies have disappointed the most among 10 groups in the S&P 500. The 17 companies that have reported have missed estimates by an average 3.6%. Analysts predict the group will report an 8% decline in profit, compared with a 2.4% increase estimated for the S&P 500 as a whole.
Yields on 10-year Treasuries declined one basis point, or 0.01 percentage point, to 2.48%, after falling four basis points July 19. Treasuries capped a second weekly gain after Bernanke quelled concern that a reduction of US stimulus was imminent. The Fed chief said July 18 that it was “way too early to make any judgment” about starting to taper the program in September. The previous day, Bernanke said the Fed’s quantitative easing is “by no means on a preset course.”
Industrial metals
US policy makers are scheduled to next meet July 30 to 31.
The MSCI Emerging Markets Index added 0.1% in early trading, after rising 0.5% last week, a second week of gains.
Gold jumped to US$1,311.87 an ounce today, while silver surged 1.5% to US$19.80 and platinum and palladium climbed at least 0.5%. Copper futures in New York rose to US$3.15 a pound, climbing for a third day.
Industrial metals rose, with zinc, lead, aluminum and zinc for three-month delivery on the London Metal Exchange gaining at least 0.4%. Rubber futures climbed 1.5%.
West Texas Intermediate crude added 0.3% to US$108.34 a barrel, rising for a fourth day. WTI became more expensive than Brent for the first time in almost three years as pipeline and rail shipments helped clear a bottleneck that reduced the price of the US benchmark.
– Emma O’Brien and Adam Haigh
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