Asian markets are poised to open higher today, taking cues from the solid rally on Wall Street, where US stocks surged after softer-than-expected Producer Price Index data. The Technology sector will likely continue outperforming, buoyed by strong global demand for its stocks. The risk-on sentiment is expected to rise as the US Dollar hovers close to year-to-date lows. Market participants are showing interest in emerging markets, given that the peak of the global central bank rate is near, and inflation continues to soften. In the second quarter, the ‘China trade’ could be a key driver as sector rotations occur. China’s economy is reopening, and the March trade data showed a robust increase of 22.5% YoY in oil imports, the highest level since June 2020, underscoring the positive signs emerging from the region. It is worth keeping an eye on these trends as they look for opportunities in the region.
With the US earnings season beginning, investors will expect more downside to earnings estimates for 2023. This downside risk has been amplified by the recent crash of Silicon Valley Bank, which wiped out some regional lenders and put a major hole in banks’ balance sheets. This will likely make banks less willing to lend, further tightening the economy. More bearish participants have warned of an earnings recession hitting the market as firms continue to get battered in the current macro environment. Nonetheless, several banks, including JPMorgan Chase, Citigroup, and Wells Fargo, will report results later today. Participants will be closely watching these earnings reports for insights into the current state of the US economy and the potential impact on global markets. Short-term volatility on global equities is expected ahead and after the core banks’ earnings reports.
