Asian equities mixed after positive Wall Street session
Wall Street enjoyed a modestly positive session overnight with the S&P 500 closing 1.13% higher, the Nasdaq rising 0.15%, and the Dow Jones climbing 0.24%. Japan and South Korean markets are closed today, but China’s expansionary PMI data, combined with a positive New York session, has lifted China’s stock markets. The Shanghai Composite and CSI 300 are both 0.80% higher and Hong Kong has risen by 0.50%.
Elsewhere in the region, the picture is more pessimistic. In Singapore, Indonesia and Malaysia, investors appear to be taking risk positioning off the table ahead of the New Year break. That has sent Singapore and Kuala Lumpur down 0.60%, with Jakarta falling by 1.0%. Taipei has eased by 0.15%.
Australian markets are also suffering as year-end squaring of positions and ongoing concerns about the impact of Sydney’s Covid-19 outbreak have eroded sentiment. The ASX 100 has fallen 1.55%, and the All Ordinaries has fallen by 1.35% as markets Downunder move towards an early close.
Although China markets and US index futures have moved higher today, I would expect European exchanges to follow the pattern in regional markets ex-China. That means investors are likely to reduce exposures over the holiday period, and I expect European markets to move gently lower this afternoon.
As we look ahead to the New Year, it is prudent to keep in mind that the first directional move of the year is usually the wrong one, resulting in a very painful correction, before regular service resumes after convalescence in profit & loss hospital. The finale to the US election takes place next Tuesday, with the double senate runoff in the US state of Georgia. The election is critical because if the Democrats win both seats, they will assume control of the House, the Senate, and the presidency. Conversely, if the Republicans win only one of the two seats, the status quo remains. Markets have been pricing in the second scenario as an absolute certainty, but should the Democrats pull off a stunning sweep, the markets could react with significant volatility.
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