US recovery not evident in Asia

Big-tech earnings boost Wall Street

Asia is looking past the big-tech bounce on Wall Street overnight, with regional markets universally in the red. Record daily cases of Covid-19 in the US, lockdowns in Europe and Tuesday’s US election have Asia in risk-reduction mode, with US equity index futures also giving back some of their overnight gains.

Overnight the FAANGsTa’s lifted US markets, with the S&P 500 rising 1.20%, the Nasdaq jumping 1.64%, while the Dow Jones added 0.52%. All three indices are slightly lower in Asian futures trading this morning.

The Nikkei 225 is 0.70% lower, with the Kospi falling 1.0%. In China, the Shanghai Composite and CSI 300 have lost 0.30%, with Hong Kong 0.15% lower. Taiwan is down 0.40% with Singapore and Malaysia 0.65%. Even the ever-effervescent Australians could not bring themselves to follow Wall Street in their usual slavish fashion, as the ASX 200 and All Ordinaries are down 0.30%.

In the US, Advance GDP for the third quarter outperformed overnight, jumping 33.1 per cent. This reversed the Q2 fall of 31.4%, completely messing up the y-axis of the GDP growth chart for a generation to come. The post-lockdown reopening dividened was clear in the numbers, but I note that GDP will still finish 2020 lower by 3-4%. Pantheon Macroeconomics is stating that the Q3 number would have needed to be around 53% to get back to zero for the year. In other words, even with the huge lift in Q3, the US economy has not yet reached its pre-corona levels.

Asia’s performance today, while not overtly negative, is still a warning that sentiment remains negative. European stock markets will almost certainly follow Asia’s lead, and it is hard to see Wall Street bucking the trend now that the quarterly big-tech results have passed. Markets will remain vulnerable to more bad news on the Covid-19 front from the US and Europe, while the nuances of the US election will leave equities to follow other asset classes into the hunkering-down mode.

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 and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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