Goldman Turns to Strong Japanese Earnings Outlook After Abe Win

(Bloomberg) -- Japan’s election is over and Prime Minister Shinzo Abe has won in a landslide. What’s next for the stock market? Earnings. 

And Goldman Sachs Group Inc. is predicting a better-than-expected season.

With second-quarter reporting getting into full swing next week, Goldman Sachs has updated its leading indicator for earnings revisions, strategists led by Kathy Matsui wrote in a note dated Oct. 22. “We think positive surprises will predominate against the backdrop of global economic growth,” she wrote.

The indicator, which predicts the direction and magnitude of earnings revisions three months ahead, suggests “continuing favorable earnings momentum” and also signals positive surprises in results. It’s now at an overall boost of 4.7 percent for revisions compared to 2.8 percent at the end of August.

That’s more good news for an already buoyant equity market. The Nikkei 225 Stock Average rose 1.1 percent as of 12:45 p.m. Monday in Tokyo, heading for a record 15th straight day of gains. The measure of Japanese blue-chips is poised to close, once again, at its highest since 1996.

To contact the reporter on this story: Divya Balji in Singapore at dbalji1@bloomberg.net.

To contact the editors responsible for this story: Chris Nagi at chrisnagi@bloomberg.net, Tom Redmond, Colin Simpson