Equity markets rise on stimulus hopes

I’m getting bored writing that headline, but the US stimulus talks continue to be the only driver for US equity markets, and by default, everyone else at the moment. Google antitrust cases and poor Netflix results were ignored by Wall Street, which hung on the words of Nancy Pelosi that they “were still talking and getting closer.”

Wall Street gains extend to Asia

Wall Street finished the day positively, with the S&P 500 climbing 0.47%, the Nasdaq adding 0.32%, and the Dow Jones rising 0.40%. The “still talking” afterglow had spread into Asia with regional equity markets almost unchanged to slightly higher. The Nikkei 225 and Kospi are 0.40% higher, with mainland China’s Shanghai Composite and CSI 300 unchanged. Hong Kong has jumped 1.0% as Ant Financial IPO fever increases with more China IPO’s now on the horizon.

Regionally, Singapore is 0.60% higher, with Kuala Lumpur flat, weighed down by ongoing political concerns. Taiwan is 0.55% higher, and Manila is 1.0% higher. Australia is muted despite the overnight rally in copper, as markets there await easing signals from the RBA. Nevertheless, both the ASX 200 and All Ordinaries have risen slightly by 0.15%.

In my opinion, the markets continue to ignore that the real risk to the US stimulus deal is the US Senate. If Republican Senate leader Mitch McConnell refuses to introduce a stimulus bill, then the stimulus is dead in the water until after the US election. Based on the recent rhetoric from McConnell and other Senate Republicans, they are not at all inclined to support a giant stimulus bill. One also gets the impression that with one eye on the president’s grim position in the polls, the close race for the Senate and thus, their own jobs, the Senate Republicans are beginning to distance themselves from President Trump. That would reduce his ability to twist the Senate into backing the bill.

US index futures are performing strongly in after-hours trading, and that should ensure that Asian markets stay in positive territory today and will push Europe higher at its open. As ever, the main risk is headline risk, either from stimulus negotiations or the presidential Twitter account.

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, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was 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 and Channel News Asia as well as in leading print publications such as 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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