North Asia woes see the usual ASEAN pivot

US earnings jump but equities yawn

US equities eked out tiny gains overnight despite excellent results from heavyweights such as Microsoft, and Alphabet after-hours. All three major indexes closed out at record or near-record highs, but it increasingly seems that markets have priced in so much good news expectations on the earnings from, that stocks are struggling for further upward momentum. That said, the lack of downside earnings shocks means that equities are not inclined to rush for the exit door either.

In this context, Apple’s earnings call today will be vital. With markets running on vapours, an expected excellent result should keep the status quo with US markets. However, if Apple was to show supply chain stresses and challenges in future sales because of that, it could be the catalyst for a downside correction. Investors may well be begrudgingly starting to ponder the full implications of next week’s FOMC meeting and the start of the taper.

Overnight, the S&P 500 limped to a 0.18% gain, while the Nasdaq edged 0.06% higher, and the Dow Jones produced a minuscule 0.04% rise. In Asia, the negative headlines seeping out of China are also weighing on US futures in Asia for the first time this week, also indicating waning bullish momentum. All three are slightly in the red despite the impressive after-hours Alphabet release.

In Asia, the fast-money FOMO market of Japan has corrected lower this morning after a banner session yesterday. The Nikkei 225 has fallen 0.60% with South Korea’s Kospi falling 0.75%. Mainland China has headed directly south today as that stream of negative headlines has hit the wires. The Shanghai Composite is down 0.95% with the CSI 300 falling by 0.80%. Hong Kong has tumbled, led by mainland heavyweights, the Hang Seng tumbling by 1.70%. Taipei is holding its own unchanged for the day.

As is often the case these days when the North Asia heavyweights have a bad day at the office, ASEAN markets see a pivot of fast-money investor inflows. Singapore has climbed by 0.60% today with Kuala Lumpur edging 0.05% higher and Jakarta rallying by 0.50%. Bangkok is 0.15% higher while Manila has climbed by 0.30%. The multi-year highs for inflation in Australia have ramped up RBA nerves, pushing the All Ordinaries down by 0.30%, and the ASX 300 by 0.10%. ASEAN and Australia’s higher beta to primary resources seems to be supporting regional equities with market sentiment swinging to inflation-watching today.

European stock markets should open modestly higher this afternoon, but they, and US markets, will once again be beholden to the tender mercies of the US earnings season this evening, especially Apple.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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