Asian shares wait on US bank earnings with Brent $6.47 below its recent peak

The report ties the challenge to tech valuations to earnings season as a whole ^[1] and mentions the banks only as Tuesday's opening act ^[5]. It does not say what banks are expected to earn. The link from bank results to tech multiples is ours to draw, and we draw it through credit. The US investment-grade credit default swap index has risen sharply to its highest level since the Iran war began ^[19]. "Overall, wider spreads suggest investors are questioning whether AI revenues can keep pace with rising borrowing costs," AMP economist My Bui said ^[20].

We think the profit line is the lesser risk this week. A third-quarter forecast that high makes a beat the base case, or rather the base case for the tech names that supply most of the growth ^[7]. The rate those earnings are discounted at is still moving. Energy is expected to lift headline CPI by 0.6% to an annual 3.7% ^[9], and JPMorgan's Bruce Kasman said "Oil prices remain higher than we had assumed as shipping costs have soared, and product prices are even higher," ^[11].

Brent at $103.50 is $6.47, or 5.9%, below its recent top ^[17][18]. A 1.1% dip on a thin Monday ^[3] leaves untouched a CPI forecast already built on rising energy costs ^[9]. The bigger swing is the ceasefire. There was considerable confusion about President Trump's announcement of an energy ceasefire between Ukraine and Russia, and neither side had confirmed it ^[16]. Confirmation would give Brent room to fall further. A collapse would leave the Gulf strikes ^[2] to set the price.

Monday's tone is weak evidence in either direction. Japan was shut and the US on a partial holiday ^[6]. South Korean stocks fell 1.1% while MSCI's Asia-Pacific index outside Japan was little changed ^[15], and S&P 500 futures edged up 0.2% while Nasdaq futures firmed 0.5% ^[14].

Bank results could confirm the credit signal. In that case the tech test arrives on Tuesday, through credit. Core CPI could also print above the 0.2% and 2.5% forecast ^[10] with the market already leaning toward a December hike ^[13]. Or the ceasefire could hold and take energy out of the inflation story. We would call our view wrong if Nasdaq futures fall after a core print in line with those forecasts, because that would point to earnings or credit, not the discount rate.