Wall Street comeback lifts Asian equities
The range-trading nature of this week saw Wall Street rise modestly overnight, mostly because US yields remained unchanged. There is nervousness out there in the equity markets, with its stretched valuations on traditional methodologies. Three Federal Reserve officials spoke overnight, and from what I can tell, all were very dovish. All were optimistic for an acceleration of the US recovery in the second half of the year, and all appeared comfortable with rising inflation.
The S&P 500 rose 0.12%, the Nasdaq rose 0.32%, and the Dow Jones rose 0.19%. With the White House quiet and a modest data calendar, that has been enough to greenlight a rally in Asian equities today.
The Nikkei 225 has risen 0.63% with the Kospi increasing 0.50%. In China, the Shanghai Composite is 0.20% higher, with the CSI 300 unchanged. Hong Kong has risen by 0.05%. Singapore has climbed 0.40%, with technology driving an impressive 1.35% rally in Taipei today. The cancellation of the US ambassadorial visit to Taiwan has also caused a collective sigh of relief in Taiwan markets.
Kuala Lumpur has rallied an impressive 1.30% today. As noted yesterday, the state emergency decree has removed political risk from the Malaysian stage for the next eight months, even if the reasoning behind it may be politically dubious to some. Bangkok and Jakarta have risen by 0.50%, while Australia’s All Ordinaries and ASX 200 are ranging either side of unchanged.
European equities should also move higher in sympathy. However, sentiment may be muted after Reuters has reported that the US is threatening European companies working on the Nord Stream 2 pipeline with sanctions. The Reuters article says that the threat is wide-ranging, encompassing construction equipment, certification and even European insurers’ insuring aspect. A Biden administration is likely to be tougher than a Trump one on Russia arguably, and this development is unlikely to be reversed come January 20th. If anything, it may tighten sanction threats, and that may dampen European equities this afternoon.