Dow Jones, Hang Seng, ASX 200 Outlook: Fed Tapering Fear Weighs On Markets

Dow Jones, Hang Seng, ASX 200 Index Outlook:

  • Dow JonesS&P 500 and Nasdaq 100 indexes closed -0.54%, -0.72% and -0.85% respectively
  • Stocks pulled back as investors assessed tapering risk after a Fed official gave hawkish comments
  • The Hang Seng and ASX 200 indexes may fall following a sour lead from Wall Street

US Earnings, Fed, RBA, BoE, Nonfarm Payrolls, Asia-Pacific Week-Ahead:

Investors eye a busy week ahead, with US earnings, RBA and BoE interest rate decisions, US and Chinese trade data, as well as US nonfarm payrolls figures in focus. Mainland Chinese markets are shut for the Labor Day holiday and will resume trading on Thursday. Japanese markets are also closed on Monday. Therefore, there will be lower liquidity and fewer participants on the first day of May in Asia-Pacific trade.

Wall Street equities pulled back broadly on Friday as a Fed official hinted at rising tapering risks. Signs of excessive risk-taking suggest it’s time to start debating a reduction in bond purchases, said Robert Kaplan, president of the Dallas Federal Reserve. His hawkish rhetoric stocked market fear about tapering risks, pulling US equity benchmarks from their record highs.

The US earnings season continued to deliver positive surprises. Around 60% of S&P 500 companies reported their Q1 results so far. Among those, more than 86% have beaten market expectations. According to data compiled by FactSet, the blended earnings growth rate for the first quarter is 45.8%, much higher than the previous forecast of 23.8%. In aggregate, companies are reporting earnings that are 22.8% above the estimates, which is far above the five-year average of 6.9%. All eleven S&P 500 sectors reported stronger-than-expected EPS growth rates, led by consumer discretionary (+181.6%), financials (+133.7%) and materials (57.1%).

This week, 139 S&P 500 companies, or 28% of the index’s constituents will release their Q1 results. Looking further ahead, analysts project double-digit earnings growth for the remaining three quarters of 2021, with a peak expected in Q2 at 58.3%. These above-average growth rates are attributed to both a faster pace of economic recovery and a low-base effect (SPX, SPY).

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