US equity index futures moved higher early this morning following a mixed finish by the physical market on Wall Street on Friday. The rally is likely driven by the weekend announcement that Nvidia will buy ARM from SoftBank. SoftBank’s sale and talk of privatisation are expected to lift the Nikkei 225 as well, with the appointment of a new Japan Prime Minister today unlikely to weigh on Japanese stocks.
Friday saw equity markets limp to a mixed finish, with the S&P 500 rising just 0.12%, the NASDAQ falling 0.56%, and the Dow Jones climbing by 0.51%. The futures on all three indices though, have increased strongly this morning, with all three up by between 0.75% and 1.0%. In Japan, the Nikkei 225 is up 0.55%, with Australia’s ASX 200 and All Ordinaries up by 0.55%.
The positive early price action should overflow into regional markets, although the Byte Dance situation may temper Chinese equities, particularly on the CSI 300 and ChiNext. One outlier maybe Indonesia, with Jakarta’s new Covid-19 lockdown starting today. Much will depend on whether the Indonesian rupiah comes under heavy selling pressure again. Should that occur, that may spook local equity markets.
Covid-19 and Brexit could weigh on European markets
European markets may struggle to catch the tailwind of early Asia, with increasing Covid-19 cases across the continent an increasing concern. Brexit travails are likely to act as a brake on any exuberance with UK markets. The likelihood of a hard Brexit climbed exponentially last week, as trade negotiations with the European Union once again hit a snag. The British government tabled a controversial bill that unilaterally changes the terms of the Brexit agreement which it reached with the European Union. Predictably, the Europeans are fuming, calling London’s unilateral move a “serious breach of trust”. The bill has drawn domestic and international condemnation, but it remains to be seen if an unpredictable and often-defiant Prime Minister Johnson will back down on his latest gambit.
