Asian equities edge up on US stimulus hopes

Wall Street climbs on possible airline rescue deal

As the US fiscal stimulus roundabout continues to spin, Wall Street pinned its hopes on President Trump’s piecemeal approach, partially supported by Democrat House Leader Nancy Pelosi. That was enough to swing momentum back into positive territory, despite the usual lack of detail and execution, following a torrid day on Tuesday.

If the last 24 hours has taught us anything about financial markets, it is that the US presidential election and its evolution is becoming the most critical driver of volatility in the markets. With Election Day less than four weeks away, we can expect market volatility to increase and economic data to be overshadowed by election noise. Traders should be ready for much more two-way volatility in the next weeks and much less omnidirectional price action.

Wall Street’s leading indices staged an impressive revival, the S&P500 rising 1.74%, the Nasdaq increasing 1.88%, and the Dow Jones climbing 1.91%. Aftermarket futures on all three have tracked higher after the vice-presidential debate passed without incident, although sentiment in Asia, remains more cautious.

With the region awaiting China’s return tomorrow, Asia has once again, chosen not to buy in completely to the US volatility swings. The Nikkei 225 has risen 1.0% with the Kospi up 0.35% after disappointing current account data this morning. Singapore has edged 0.20% lower, and Hong Kong has fallen 0.80% as the US government targeted Tencent and Ant Financial for possible US restrictions. Australian markets, ever keen to mirror moves in the US, have outperformed today. The ASX 200 and All Ordinaries jumping 1.30%.

With the overnight rally on Wall Street built on hopes, with very little substance, it is unsurprising that Asia has chosen not to buy into the stimulus rhetoric. We would expect much the same from Europe where the landscape is complicated by rising Covid-19 cases and the approaching UK Brexit deadline of October 15th.

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