Apple Inc. launched of its new range of iPhones on Tuesday, triggering profit-taking in the company and a reassessment of vaccine development risks. This saw the FOMO herd lighten positioning overnight, pushing Wall Street to a negative close. The fall-out relative to the previous day’s rallies was modest, however, suggesting that the underlying bullish momentum has not yet succumbed to a knock-out blow.
The S&P 500 fell 0.63% overnight, with the Nasdaq finishing 0.10% lower and the Dow Jones easing by 0.55%. Today, the Nikkei 225 is unchanged with the Kospi down 0.40%. China’s Shanghai Composite and CSI 300 are 0.55% lower with Hong Kong down 0.30%. Singapore has eased 0.50% with Sydney markets unchanged on the day.
Asia has contented itself to watch from the side-lines this week, wary of headline-bomb US presidential tweet risk. Its reluctance to slavishly follow Wall Street has meant that losses in the region are only modest ones today. Short of any bullish surprises from Xi Jinping in Shenzhen today, Asian markets look set to trade sideways for the rest of the session.
Most of the froth in risk assets this week has been driven by expectations that the Democrats and Republicans would get a fiscal stimulus package over the line. The Democrats delivered a reality check here as well, sticking to their USD2.2 trillion positions. Republicans still want a slimmed-down package with the US president confusing everybody by telling both sides to “go large or go home,” contradicting his own party and his own position from early last week. That more than anything explains the rotation out of equities and precious metals and into haven US dollars overnight. The cold reality that markets have refused to countenance is that even if an agreement was reached, its chances of being enacted before the November election are about zero. Still, this is 2020, the year where markets never let reality get in the way of a good story.
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