Asian stocks like lower for longer

US stock futures boost Asian equities

Asian stock markets have edged higher this morning after Federal Reserve Chair Powell delivered his much-anticipated speech at Jackson Hole. Powell’s address contained two key points for the markets. First, that the Fed would allow inflation to overshoot its longstanding target of 2.0%, in order to achieve an “averaging effect”. Second, interest rates will stay lower for longer and longer.

Asian equities were led by after-hours US stock futures, with the S&P 500 e-mini and Nasdaq futures climbing strongly, both up by 0.50%, and Dow futures rising 0.60%. Not surprisingly, the US yield curve steepened with 30-year rates rising more than the 2-year short-end. That explains why bank stocks led the Dow Jones and S&P 500 higher overnight; in theory, banks make more money with a steeper positive yield curve.

Japan’s Nikkei 225 is 0.40% higher, with trade-sensitive South Korea and Singapore both liking what they saw on the rates front from Mr Powell. The Kospi has risen 1.30%, and the bank and property heavy Straits Times by 1.50%. In China, the Shanghai Composite is 0.70% higher, although the CSI 300 and Hang Seng are unchanged, reflecting the legacy company nature of the former. A fall in commodity prices, though, has seen the resource-heavy indices in Australia set to finish the week on a sour note. The ASX 200 is down 1.0% and the All Ordinaries has fallen by 0.50%

The trading wraps up with some key consumer releases in the United States. Personal Spending data for July will be released this evening, with the Core PCE Index expected to rise 0.50% MoM. Keep in mind that the data dates from July, and here we are almost in September, so it is unlikely to reflect the full effects of Covid-19 sweeping the US sunbelt. However, a negative reading may set up stock markets for a nervous finish and nip the incipient rise in US yields in the bud as quickly as it started.

Overall, the news from the Federal Reserve was mostly expected, and will not structurally change the buy-everything sentiment of global stock markets.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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