Wall Street drags Asia lower

Asia equities dip lower as investors in a cautious mood

Wall Street limped to a negative close overnight, as a lack of stimulus progress and a looming full lockdown in New York sapped investor confidence. The S&P 500 fell 0.44%, the Nasdaq rose 0.50%, and the Dow Jones lost 0.53%. The price action is hinting at a defensive rotation while markets await clarity elsewhere.

That has prompted investors to move to the side-lines in Asia, where the Nikkei 225 has eased by 0.40%, and the Kospi has fallen 0.70%. In China, the Shanghai Composite and CSI 300 are 0.40% lower, with corporate credit worries, and technology company fines adding to the temporary gloom. Hong Kong has fallen 0.85% despite the government announcing more Covid-19 support.

China’s numbers pointed upwards on Tuesday. Industrial Production and Fixed Asset Investment YoY for November rose 7.0% and 2.60%, which matched expectations. Retail Sales YoY for November come in slightly lower at 5.0%, but still a strong showing. All of the data improved over October, reaffirming China’s remarkable recovery as it leads the world out of the Covid-19 recession. The data has had no noticeable effect on China markets though, with financial markets more concerned about the recent waves of corporate defaults and a tight funding market.

Around regional Asia, Singapore has eased 0.45%, although Kuala Lumpur has risen 0.60%, led by consumer staples and energy. Jakarta is unchanged with Bangkok down 0.40% and Manila falling 0.55%. Australian markets have also eased, but dovish RBA minutes appears to have offset fears in the resource sector after iron ore prices continued falling. The ASX 200 is down 0.25%, and the All Ordinaries has declined 0.30%.

Asia appears to have moved into a wait-and-see state, ahead of the Federal Reserve rate decision on Thursday, Asian time, and more clarity of US stimulus progress. A new bi-partisan USD908 billion US fiscal stimulus proposal was released, but it remains unclear if the bill will get past the Republican-dominated Senate.

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