Chinese markets drop, but Hong Kong climbs
Equities in Asia, except for China, were higher across the board earlier today, but a combination of factors, notably a soft China session, has seen most of those early gains unwound. Overnight, US earnings and recovery package hopes kept the music playing on Wall Street, which shook of higher US yields and posited another positive finish. The S&P 500 rose 0.74%, the Nasdaq climbed by 0.71%, with the Dow Jones finishing 0.57% higher.
Mainland China markets are hovering in negative territory, despite the PBOC adding liquid via the repo today. That hasn’t stopped the yuan rallying to five-month highs versus the US dollar, or 5½ year highs on a trade-weighted basis, weighing on exporters. But most importantly, China state media said this morning that expectations for a RRR cut in Q4 have fallen. That is not my base case, but it appears to have been enough to take the wind from the sails of local markets. The Shanghai Composite is 0.25% lower, while the CSI 300 is down 0.20%. None of this has affected Hong Kong though, with the Hang Seng leaping 1.45% higher today. The rally has been led by a 7.0% rise in Ali Baba shares after it was announced Jack Ma had been allowed to travel to Europe, raising hopes the tech clampdown was easing.
In Japan, the eruption of Mt Aso has tempered earlier gains, leaving the Nikkei 225 up just 0.15% now. In South Korea, the Kospi has moved back to unchanged. Singapore and Taipei are up just 0.10% now with Kuala Lumpur falling 0.15% while Bangkok is 0.30% higher. Indonesia is closed today. Australian markets, though, continue to hold their early gains with both the ASX 200 and All Ordinaries content to follow New York 0.70% higher today.
European equity markets will take their cue from New York as usual given the lack of Eurozone data today. That should mean a positive start to trading. US earnings will continue to drive sentiment globally ex-China, and as long as they remain upbeat, so should equity markets this week.