Asian stocks higher on back of solid US earnings

Asian indexes traded higher on Wednesday, following the rise in U.S. indexes overnight on the back of strong earnings announcements and on expectations for U.S. President Donald Trump’s impending tax reforms.

Stocks in Asia climbed higher across the board. Japan’s benchmark Nikkei 225 index edged up 0.73 percent, while the Kospi registered a gain of 0.33 percent. The ASX 200 rose 0.62 percent.

Markets in greater China were higher with the Hang Seng Index up by 0.58 percent, and the Shanghai Composite inched up by 0.36 percent, while the Shenzhen Composite rose 0.323 percent.

In the U.S., stocks soared as McDonald’s and Caterpillar reported solid earnings, with the Nasdaq surpassing the 6,000 mark for the first time. The Dow Jones industrial average surged 1.12 percent or 232.23 points to close at 20,996.12.

“(T)oday’s moves appear to more related to expectations for Trump’s impending ‘broad principals’ tax plan … It is widely tipped that … the corporate tax rate (will) be cut to 15 percent from 35 percent. The key for markets will be how will such a tax cut be funded and what is the likelihood of the tax cut being passed by Congress.” National Australia Bank economist Tapas Strickland said in a note.

While markets may go higher on the back of flashy tax headlines, ThinkMarkets Chief Market Analyst Naeem Aslam added that the risk of a looming government shutdown had not been factored in sufficiently. Trump had requested for additional spending for his border wall plans, but has appeared to ease demands it happens this week.

“Not much is priced in again and we are seeing many safe haven(s) out of luck. But as we move closer to Saturday, this is when the government will start to shut down in case of a ‘no deal,’ we could see the last minute panic coming in the market once again,” he said.

Nevertheless, the dollar strengthened against the yen on the back of tax optimism, trading at 111.21 at 12:00 pm HK/SIN. “If Trump is light on details, the dollar could unwind its gains quickly but if he over delivers, dollar/yen will make a run for 112,” BK Asset Management Managing Director Kathy Lien said.

The Canadian dollar continued to trade around its lowest levels against the dollar since last December due to trade concerns. The greenback last traded at C$1.3568 against the loonie. Meanwhile, Aussie/dollar weakened to trade at $0.7515, off the $0.756 handle seen on Monday.

The dollar index traded at 98.792, off 99 handle seen earlier this week, possibly due to renewed euro strength on improved risk appetite. Euro/dollar fetched $1.0944 earlier in the session, surpassing the five-and-a-half month high of $1.0935 hit following Emmanuel Macron’s victory at the first round of French polls.

In corporate news, Japan Post Holdings reported a $3.6 billion write-down on it’s Australian logistics unit, Toll Holdings. Japan Post also estimated losses of 40 billion yen ($362.35 million) — its first annual loss in around ten years. Japan Post stocks traded up 0.36 percent.

Meanwhile, Toshiba said it would be parting ways with its auditor PricewaterhouseCoopers Aarata, according to the Nikkei. The auditor had not endorsed Toshiba’s Q3 earnings which had been released earlier this month.

In a new development, U.S. Secretary of Commerce Wilbur Ross said the government could potentially provide support to Toshiba’s U.S. nuclear arm Westinghouse, the Wall Street Journal said. Westinghouse filed for bankruptcy in March. Toshiba shares rose 1.99 percent following the news.

BHP Billiton cut its production targets for iron ore, coking coal and copper. The miner attributed the cuts to poor weather conditions in Australia and strikes at the Escondida mine in Chile. Shares of BHP Billiton gained 0.6 percent.

Gaming stocks in Hong Kong popped on Wednesday, with most major companies registering gains above 3 percent. This follows the Q1 earnings release of Wynn Resorts, Wynn Macau’s parent company, which beat Street estimates. Wynn Macau Q1 net profits rose 26 percent on year.

“We remain optimistic on Wynn Macau’s outlook, driven by continuous ramp-up at Wynn Palace and our expectation of a significant improvement in its debt-to-EBITDA ratio,” Citi equity analysts George Choi, Anil Daswani and Aras Poon wrote in a note.

Shares of the company jumped 4.87 percent, SJM Holdings added 5.42 percent and Melco International Development gained 4.59 percent.

Oil prices were lower following a report on the build in U.S. crude inventories. Brent crude futures traded 0.12 percent lower at $52.04 a barrel while U.S. crude futures were down 0.2 percent at $49.46.

On the economic calendar, Australia reported that Q1 consumer price inflation rose 2.1 percent on year even though key measure of core inflation remained below the Reserve Bank of Australia’s 2 to 3 percent target.

Singapore industrial production numbers for March are expected at 1:00 pm. The Bank of Japan also embarks on a two-day meeting beginning today.

Source: CNBC