Equities pause for breath

Asian equities markets cautiously bullish

Ahead of Microsoft and Tesla earnings today, Wall Street paused for breath last night. The Nasdaq retreated by 0.80%, while the S&P 500 rose 0.17% and the Dow Jones rose 0.60%. The moves overnight looked very much like a basis play between the main indices. With profit-taking pushing the Nasdaq lower, that money was shifting into the previously lagging S&P and Dow Jones. US stocks, though, appear to be merely pausing for breath, before continuing higher.

Much the same pattern is appearing in Asia today, with Asia cautiously bullish except for Japan and notably, Australia. The Nikkei 225 has retreated 0.40%, with sellers appearing ahead of Japan’s two-day holiday starting tomorrow.

Across the rest of Asia, the picture is broadly positive. China’s Shanghai Composite is 1.35% higher, with the CSI 300 up 0.75%. Hong Kong is 0.50% higher, and Seoul has risen by 0.40%. Singapore has fallen 0.75% on fears more companies will cut dividends in its real estate heavy STI index, while Kuala Lumpur and Jakarta are modestly higher.

Australian stock markets have taken a hit today with the ASX 200 and All Ordinaries falling by 1.0%, a slight improvement on earlier trading. Given how resource-heavy the leading indices are, much of the fall can be laid at the table of the Australian dollar. It rose 1.60% overnight, making Australia’s exports in theory, more expensive. We would expect the sell-off today to be more passing than structural, after an impressive month for stocks Down Under already.

It could well be a positive week for equities, as the US dollar continues to show signs of weakness. The greenback retreat has continued across both major and regional currencies in Asia today and continue into Europe. With the dollar showing no signs of reversing directions, we can expect upward momentum to remain undiminished for the remainder of the week.

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