Global recovery markets outperform in Asia
Fiscal stimulus hopes were raised in the US overnight, allowing New York’s major indices to shrug off recent losses. Equity markets brushed off a previous string of losses, despite weaker US data on Tuesday. Rising hopes that US stimulus negotiations were making progress, with the two-part latest incarnation appearing more palatable to both sides, stopped the multi-day equities retreat in its tracks. The price action overnight emphasising that a positive outcome to the bi-partisan talks and, to a lesser extent, the USD1.4 trillion government funding bill have taken over the focus of the markets, trumping even the FOMC meeting in importance. Wall Street responded to the latest developments on Capitol Hill with strong gains. The S&P 500 rose 1.29%, the Nasdaq climbed 1.25%, and the Dow Jones closed 1.13% higher.
Asian markets have duly followed suit, but it is notable that ASEAN and Australian markets are outperforming, with their higher beta to the global recovery trade and higher commodity prices. The Nikkei 225 and Kospi are just 0.30% higher, with mainland China’s Shanghai Composite and CSI 300 almost unchanged.
Hong Kong has risen by 0.85%, with Singapore climbing by 0.40%, Jakarta jumping 1.0% and Kuala Lumpur rallying at a rate of 0.90%. In Australia, there are no signs of China import-ban fears and the stock markets are ignoring the trade tensions between China and Australia. The ASX 200 and All Ordinaries rising an impressive 1.20% today.
Markets are likely to maintain their positive outlook in Asia, barring any headline surprises, with “old-economy/resource-centric” markets outperforming. Euphoria will ebb when Europe arrives though, with European markets negotiating a packed data calendar and the Brexit saga. It is much the same for US markets with heavyweight data followed by the critical FOMC meeting outcome. Anything less than uber-dovish and an intention to cap longer-term US yields could result in a sharp, but short, downward correction.
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