Asian shares in limbo as investors look to earnings

Mon Jul 7, 2014 2:15am EDT
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By Hideyuki Sano

TOKYO (Reuters) - Asian stock markets were subdued on Monday with U.S. markets closed on Friday but held near three-year highs on optimism about the U.S. economy, with investors now shifting their focus to corporate earnings.

MSCI's broadest index of Asia-Pacific shares outside Japan was little changed from Friday's high, staying near its 2011 peak after a rise of about 7 percent so far this year.

Japan's Nikkei average slipped about 0.3 percent from a 5-1/2-month high on Friday. European shares are expected to open steady to slightly higher. Both Germany's DAX and France's CAC40 are seen rising up to 0.1 percent.

The world's share prices rallied last week, with MSCI's All World share index hitting a record high, as U.S. employment growth smashed forecasts and unemployment fell to near a six-year low of 6.1 percent.

"The U.S. job data was undeniably strong, confirming a strong recovery in the economy," said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management.

Investors are now looking at whether record share prices will be justified by quarterly earnings reports and forecasts in the United States and elsewhere, with aluminium producer Alcoa kicking off the U.S. earnings season on Tuesday.

"People said the U.S. earnings would be bad for January-March but in the end the profits were up. I would expect decent results," Shimizu said.

Analysts polled by Reuters expect earnings growth of 6.2 percent for the second quarter, and a return to double-digits in the third and fourth quarters: 10.9 percent and 11.9 percent, respectively.   Continued...

A pedestrian is reflected on an electronic board showing the graph of the recent fluctuations of Japan's Nikkei average outside a brokerage in Tokyo June 19, 2014.  REUTERS/Yuya Shino