Asian equities generally calm
As has been the case in recent sessions, Asia is contenting itself with replicating the previous Wall Street session’s price movements, as the data calendar remains quiet in the region. There are exceptions, of course. China equities have dropped today after Western countries applied sanctions to Chinese officials. The New Zealand dollar has fallen today after the government surprised the country with some quite aggressive new property investment restrictions.
The New York session was nondescript, with US yields easing slightly after existing home sales missed badly to the downside. That was likely weather-related, but on a quiet news day, the resulting fall in yields was enough to spur a modest rally by equities, and a gentle retreat by the US dollar.
Things should pick up this evening and may well lure markets out of their dotage. Treasury Secretary Yellen and Fed Chairman Powell were their usual upbeat selves overnight, but today we have four more Fed Governors speaking. Governors Barkin, Bostic, Brainard and Bullard are all scheduled to speak today, and maybe an interest rate outlook tidbit will spill from one of their lips.
The governments of the United States, Canada, Britain, and the European Union, jointly announced direct sanctions on Chinese officials associated with the Uighur issue overnight. The joint announcement infuriated China and will be sure to muddy the geopolitical waters going forward but was not immediately market sensitive. What China chooses to do in response could well be.
However, what may be market sensitive is that President Biden will receive briefings this week on the next stimulus plan he had campaigned on. Although no details have emerged, other than a mooted massive investment in infrastructure, the number of between three and four trillion dollars is significant. If more concrete details emerge this week, along with a proposed timetable, it is unlikely the US bond market will remain sleepy. The prospect of even more US borrowing should be enough to start yields higher again, with technology stocks losing at the expense of cyclicals.
The British and Europeans appear to be making some tentative headway in their AstraZeneca vaccine dispute. But the European Union’s blocking of Australian shipments and threats to block British shipments risks blowing up in their face politically. That story may have some distance to run yet. It is ironic given that the blood-clot scare may mean Europeans could be reluctant to take it anyway. The Nordic countries have ignored the EMA and kept it on the suspended list as Europe struggles to contain Covid-19 every man for himself sentiment. If Europe hoards AstraZeneca vaccines, but not enough people use it, and they are left with piles of expired batches, no amount of PR will dig them out of that ever-deepening hole.
The vaccine spat is negative for European and UK asset markets this week. Europe is also contending with spiking Covid-19 cases and reimposing or extending lockdowns across major European economies. That has been felt most keenly in oil markets, with reassessments of future consumption taking place. The spike in Covid-19 cases in India, the world’s third-largest oil importer, threatens to deepen that gloom. In Europe’s case, though, its recovery is now inevitably delayed and will be a headwind for the bloc’s markets this week.
In Asia, the data calendar is quiet. Singapore inflation is expected to rise to 0.60%, but before we get too excited, most of the gain will be due to the hike in petrol taxes. That was announced in the February budget and enacted immediately. For February, Taiwan’s Industrial Production is expected to suffer Lunar New Year-related falls, rising only 3.50% compared to January’s 18.80% rise. Given Taiwan’s role at the centre of global semiconductor manufacturing and the global chip shortage, that component will be closely monitored. A negative read here will also make itself felt in technology and car manufacturer stocks in the short-term.