The early action was cautious with MSCI’s broadest index of Asia-Pacific shares outside Japan flat, after pulling back 2.5% last week

Asian share markets dropped on Monday as investors braced for U.S. and Chinese inflation data, along with a corporate reporting season where robust results are required to justify high stock valuations.

Geopolitical tensions were also on the radar as disruptions in the Red Sea raised oil prices and shipping costs in Europe.

There was more promising news from Washington where U.S. congressional leaders agreed on a $1.6 trillion spending deal aimed at preventing a partial government shutdown.

The early action was cautious with MSCI’s broadest index of Asia-Pacific shares outside Japan flat, after pulling back 2.5% last week.

Japan’s Nikkei was shut for a holiday, though futures were trading higher at 33,500 compared to Friday’s cash close of 33,377. The index has been underpinned by a decline in the yen as the dollar experienced a broad rise.

Chinese blue chips shed another 0.5%, having slipped nearly 3% last week.

EUROSTOXX 50 futures were flat and FTSE futures slightly stronger. S&P 500 futures and Nasdaq futures were both 0.1% higher.

The S&P 500 shed 1.5% last week to break a nine-week winning streak, which had been its longest since 1989. The index’s 24% rally last year means valuations are looking a little stretched so much is riding on the results season.

Major banks including JPMorgan Chase and Citigroup start the reporting rush on Friday with hopes high for upbeat profits.

Consensus forecasts are that S&P 500 profits gained 3% on the year, and Goldman Sachs sees risks of an even higher outcome.

The bar ahead of 4Q results is higher than in recent quarters, but we expect S&P 500 firms in aggregate will beat analyst predictions, Goldman said in a note.

Our baseline 2024 forecast is S&P 500 EPS gains 5% year/year, and we see potential upside from stronger U.S. economic growth, lower interest rates, and a weaker dollar, they said.