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US Earnings Spur Asian Markets

This is a transcript of top stories presented by China's CCTV Business Channel as produced by CNBC Asia Pacific.

Welcome to "Asia Market Daily". I'm Saijal Patel reporting from CNBC's Asia Headquarters.

First up on the segment — it was a field day for US equities overnight...strength in Caterpillar and Qualcomm gave the construction and tech sectors a lift. We'll start off with a look at where companies stand in the US earnings season so far.

Taking a look at those who have reported on the S&P 500 - so far out of the 500 companies on the index, 147 have given updates - but this doesn't include the results we got after the bell. Amongst these, 79 percent managed to beat expectations on the earnings front. 10 percent matched expectations... and 12 percent came in below the Street's view.

Taking a look at earnings that came in below expectations.... the worst performing sector is energy. 25 percent of energy companies that have reported have come in below forecasts.

The best performing sectors when it comes to earnings...well there's three of them...material stocks, telecom stocks and utilities. All of their earnings came in 100 percent above expectations - well at least so far.

On the revenue side of the 147 that have reported on the S&P 500, 69 percent have come in above expectations. What's noteworthy- a much higher percentage have missed on the revenue side - 31 percent coming in below expectations.

So, how much impact has the state of U.S. economy had on corporate profits and what will this mean for Asian markets? Let's hear what strategists have to say.

(SOT) Andrew Freris, senior investment strategist, Asia, BNP Paribas Wealth Management:

"As the economy does slow down, and there is every reason to believe that at the very worst and the very best is going to be flat. It's not going to shrink quarter on quarter, of course not, then this is going to impact the earnings and of course, we can't move away from the fact that the core of what started all these was the housing crisis. This hasn't gone away... Actually, the correlation, directional correlation, up down up down up down, between the Shanghai market and the S&P is incredibly close. It's over 75 percent. If I look at the percentage change, it is still close, but not that close. So in the sense, the movements, directionally, are going to be very close together, but not in terms of overall percentages... The GDP growth in the States, if it's going to affect the S&P, most definitely will affect Asian markets."

Here's a quick recap on market action today.

It was an overall rally across most of Asia after strong earnings from several U.S. economic bellwethers eased concerns about a global slowdown.

Tech plays like Hynix Semiconductor, TSMC and Toshiba all surging. Australia shares on the rise, at almost 2 percent. After 5 days of losses, Japan also closed up at 2 percent. South Korea ended more than a percent higher. LG Display in particular, ended the day 3 percent higher. It reported a 51 percent rise on year in Q2 profits earlier.

Apple of course, is one of the driving forces. The panel maker said it's not able to meet its orders. Remember, Apple launched its iPad product in 9 more markets today - including Hong Kong, Singapore and New Zealand.

China markets dipping in and out of negative territory today.

In India, stellar earnings for Number 3 software services provider Wipro, on strong outsource demand from U.S. and Europe.

Here's a weekly lookahead from our reporter Sonia Shenoy.

Thanks so much for that. Lots of corporate events to watch out for in terms of both economic events and corporate earnings that will get detailed next week.

First up, of course, we have a whole long list of corporate earnings that will be tabled next week. A lot from the auto sector, so we kickstart with Ashok Leyland on the 27th July. Now that is a CV manufacturer, one of the biggest CV manufacturers in India to detail their numbers. And a good set of numbers as well you can expect from Ashok Leyland because of the way the CV sector has turned this time around.

Not just that, M&M from the auto space will be detailing their numbers on the 28th July, so keep an eye out on that one as well. Hero Honda, from the two-wheeler space, will be coming out with their earnings on the 29th July. The entire two-wheeler industry is looking extremely robust because of the way retail demand has shaped up. But Hero Honda will be a laggard compared to the other like TVS Motors and Bajaj Auto, because of the way Hero Honda has performed in the past, and the withdrawal of the base effect as well. So Hero Honda not a great set of numbers that you can expect. Hul is the other one. Hindustan Unilever from the FMCG space that will come out with their earnings on the 27th July.

Apart from that, in the economic events that you need to watch out for, most important event will be the RBI meet on the 27th July where there will be a discussion for the review of the monetary policy. There is a consensus that the 25 basis point hike in the interest rate will come about at that meet, because of the way the inflation situation is panning out, so all eyes on that meet on the 27th July. That is the most important economic event that you need to watch out for.

Patel:

The story that's been keeping the markets on its toes all week - results of Europe's stress test for banks. The moment of truth will be revealed - come 6pm in Brussels tonight. So what exactly are markets hoping for? Here's one investor's take.

(SOT) Len Blum, managing director, Westwood Capital:

"With the U.S. stress tests, I think 10 banks were asked to go out and raise $75 billion. I think one of the best outcomes of this could be if the weak banks are told to raise money and there's some kind of confidence that they can but we just don't know what to expect, it's really a wait-and-see kind of game right now."

CNBC's Carolin Schober also caught up earlier with Swiss banking group Credit Suisse. It's the first of European banks to post earnings, with slightly higher-than-expected profits. On how European banks are likely to fare with the stress tests, CEO Brady Dougan said he believed the results will be good for the industry and markets.

(INTERVIEW) Brady Dougan, CEO, Credit Suisse:

I think first of all, we are big proponents in transparency, with regard to our own numbers we try to really be industry-leading in terms of transparency that we offered. So I think in general transparency is a good thing. So our view is that whatever information comes out of this stress test, discussion will actually create some more transparency. Whether that will be enough for the markets to be satisfied or not, I guess we'll only see in time. But I think actually, it will provide additional data for people to think about. The companies and the business models, the impact on them. So our general view our hope is that will provide transparency for the market and that should be helpful.

Schober: So if Finmag decides to release Swiss stress test along with European banking stress tests. I guess that will really work to your advantage. I guess there is no question about that, because we know the Finmag is imposing tougher rules in terms of capital and liquidity ratios on Swiss banks but do you feel those rules are really too tough?

Brady: Well, I think we are stress tested on a regular basis by finreg for every quarter so it's not a special exercise. I think they do have a very rigorous framework, I think that's probably a good thing. We're obviously extremely well capitalized, I think we have one of the lowest risk exposure bases of anyone in the business. So I think in any of those circumstances we come out extremely well capitalized. I think people can understand the differences between the different tests and the different approaches to them.. I mean, we don't have all the details on the EU stress test but from what we know and trying to apply that to our business, we think that the resulting tier one ratio from applying stress test would leave us well in excess of the 12.5 percent tier one ratio that we sort of set as a long term target.

Well, that wraps up today's "Asia Market Daily" from CNBC.

I'm Saijal Patel. Have a great weekend.

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