by Wayne Cole

SYDNEY (Reuters) – Asian shares are bracing for an action-packed week of earnings and central bank meetings on Monday that will see higher interest rates in Europe and the United States and possibly end cycles of monetary tightening in both.

Markets are all set for quarter-point hikes from the US Federal Reserve and the European Central Bank, so the focus will be on what Fed Chairman Jerome Powell and ECB President Christine Lagarde say about the future.

NatWest Markets analyst John Briggs said, “For both, we expect this to mark the last uptrend in the cycle, although neither Lagarde or Powell may signal that the peak has arrived, instead maintaining a dovish tone and remaining dependent on the data.”

“But activity and inflation data in both sectors have softened significantly, and are likely to soften further, to end the cycle of tightening.”

The odd one out will be the Bank of Japan, which meets on Friday and is expected to retain its ultra-loose policy, but some Western banks are speculating a change in its yield curve control stance.

Reuters reported last week that BOJ policymakers prefer to examine more data to ensure wage and inflation rate increases before changing policy, though the decision may still be a close call.

The report slowed the yen and gave up an initial 1.2% gain, while MSCI’s broadest index of Asia-Pacific shares outside Japan ended 0.3% lower.

More stimulus could be announced at a meeting of China’s politburo this week, although investors have so far been underwhelmed by Beijing’s moves to boost its rapid post-pandemic recovery.

Chinese blue chips eased 0.3%, while property developer Country Gardens edged lower on debt concerns.

earning host

Eurostoxx 50 futures declined 0.2%, while futures shed 0.1%. And Nasdaq futures were little changed this week ahead of a wave of earnings.

Major companies reporting include Alphabet (NASDAQ: ), Meta, Intel (NASDAQ: ), Microsoft (NASDAQ: ), GE, AT&T (NYSE: ), Boeing (NYSE: ), . exxon mobil (NYSE: ), McDonald’s (NYSE: ), Coca-Cola, Ford and GM.

“We believe cloud giants Microsoft, Google and Amazon (NASDAQ: ) will all provide cloud upsides over the next few weeks with an AI dominance focus, positively changing the direction of IT spend/projects in this environment,” said Wedbush analysts.

The results should be good enough to justify an earnings multiple of 20 and year-to-date gains of 19%.

“We believe the recent valuation expansion is justified despite higher rates, given the long-term correlation between rates and equities, improving expected growth, and high market concentration in stocks benefiting from AI optimism,” wrote analysts at Goldman Sachs (NYSE: ).

“While our baseline forecast calls for the S&P 500 P/E multiple to reach 19x by year-end with modest contraction, we believe there are risks to the upside to valuations if lagging multiples ‘catch up’ or yields decline.”

The yield on 10-year Treasuries was steady at 3.85%, still below its recent high of 4.094%.

The US dollar jumped 1.3% to 141.41 yen on Friday after the BOJ report. This gain lifted the overall dollar higher and left the euro at $1.1123, down from its recent top of $1.1276.

There was no apparent reaction to the news that Spain is headed for a hung parliament, although its debt could come under pressure once local markets open.

The rise in the dollar pulled gold back to $1,961 an ounce and took it away from last week’s peak of $1,987. [GOL/]

Oil prices held on to gains early on Monday after climbing for four straight weeks amid a supply shortfall. [O/R]

12 cents fell to $80.95 a barrel, while 13 cents fell to $76.94.