US index futures have risen strongly in Asian trading this morning, which has quickly reversed the negative starts for the region after Wall Street finished lower overnight. Overnight the S&P 500 fell 1.77%, the Nasdaq fell by 1.99%, and the Dow Jones fell by 1.45% after the Republican fiscal stimulus build was pronounced dead on arrival at the Senate.
This morning, however, S&P e-mini, Nasdaq and Dow futures have all risen sharply, climbing by around 0.70%. I can see no actual headlines or data to support that move. I mentioned yesterday that markets could expect a lot more two-way price action and intra-day volatility in the future. That may well be what we see this morning, with profit-taking occurring from intra-day shorts set overnight.
Whatever the reasons, it has lifted Asian stock markets that looked set to follow the US lower this morning. The Nikkei has risen 0.30%, although the Kospi remain 0.70% lower after the Health Ministry extended social distancing rules for at least two days. In China, the Shanghai Composite has risen 0.10% and the CSI 300 by 0.25%, with Hong Kong 0.05% higher.
Singapore has fallen 0.30% today after Singapore Airlines slashed their workforce overnight, with Kuala Lumpur down 0.10% after Bank Negara left rates unchanged yesterday. The headless chicken situation in Jakarta, with central government departments, and Jakarta’s government, contradicting themselves and each other will also weigh on Singapore and Malaysia today. Jakarta stocks have opened steady this morning after yesterday’s rout, but it remains early days, and I expect nervous investors to continue hitting the sell button as the day progresses.
Although Asia has rallied this morning, the advance looks fragile and driven by low volume rallies in US index futures. It will likely take just a small turn in the US futures or one negative headline to see that rally dissipate. Europe is also likely to start the day in the red, with equity sentiment now much more balanced for now than the past month’s buy everything every day. If US inflation pushes US yields higher this evening, Wall Street could face another harsh day.
