All eyes on FOMC
US markets trod water overnight as positive earnings data was balanced out by investors reducing risk into this evening’s FOMC. Wall Street finished barely changed with the S&P 500 easing by 0.15%, the Nasdaq edging 0.07% lower, and the Dow Jones slipping 0.04%. Positive China Industrial Profits and hopes that the US fiscal stimulus bill will have an easy passage through the US Senate have lifted spirits in Asia, which is trading mostly in the green.
The Nikkei 225 is 0.18% higher, with the Kospi up a modest 0.34%. In China, retail investors continue to exit the market after officials warned of a stock bubble yesterday and the PBOC withdrew liquidity via the 7-day repo this morning. The Shanghai Composite is down 0.95% with the CSI 300 lower by 0.55%. The Hang Seng has managed only a modest 0.15% rally this morning.
Regionally, Singapore and Taipei have climbed 0.35%, with Kuala Lumpur up 0.55%. Covid-19 weighs on Indonesian markets today, as total cases pass 1 million and the Jakarta hospital system comes under severe pressure. That adds to worries about Indonesia’s economic recovery, sending the Jakarta Index down 2.10% this morning. After a holiday yesterday, Australian markets are playing catchup to yesterday’s price action and have fallen. The ASX 200 and All Ordinaries are down 0.50%.
The markets received a boost after Democrat Representative Jarod Golden tweeted that a bi-partisan group of Senators and Representatives are working hard on the Biden stimulus package and that Senate reconciliation is “off the table at the moment.” The rallies that we have seen have been modest in scale after the Golden’s tweet, indicating a lack of upward momentum. The unevenness of the gains is also a warning sign that any gains are likely to be short-lived. I expect Asian and European markets to continue their orderly retreat into this evening’s FOMC outcome, with all eyes on Jerome Powell & Co.