Asia follows Wall Street fall
A weak Wall Street close and the Huawei semiconductor ban over the weekend has set up Asia for a soft opening today. Wall Street took fright at poor US Retail Sales data on Friday, highlighting a weakening trend in the domestic sector over the past few months as Covid-19 restrictions undermine the US recovery. Industrial Production once again remained immune to the slowdown, but actually only makes up 10% of US GDP these days, with domestic consumption being 70%. A final nail in the coffin was less than encouraging earnings outlooks for large US banks, some of whom telegraphed warnings with the earnings releases on Friday.
The S&P 500 fell 0.72%, the Nasdaq retreated by 0.87%, and the Dow Jones slid by 0.57%. There was probably an element of risk aversion involved as well, as investors lightened exposure ahead of today’s US holiday and Wednesday’s presidential inauguration. Investors rotated out of equities and into the safety of US bonds, pushing US yields lower. US index futures are closed today.
Asian markets are mostly lower with the Nikkei 225 down 0.90% and the Kospi falling 1.25%. China’s impressive GDP data has lifted local markets, though, the Shanghai Composite rising 0.70% and the CSI 300 climbing 0.50% and the Hang Seng by 0.40%.
Jakarta is also bucking the trend, rising 0.50% as vaccinations start and commodities prices and demand remain firm. Elsewhere though, it is a sea of red. Singapore is 0.80% lower, Kuala Lumpur and Manila are lower by around 0.90%. Australian markets have followed suit, the ASX 200 easing by 0.90%, and the All Ordinaries falling by 0.70%. I expect European equities to move lower in sympathy this afternoon.
Markets will be acutely sensitive to headline risk, positive or negative, emanating from Washington DC this week. Either from the outgoing president or the new one. The eyes of the world are on Washington this week, and after Monday’s semi-holiday for Martin Luther King Day, it should be an eventful week.
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