Asian equities strike a cautious note

Asian markets mixed after gains on Wall Street

US earnings propelled Wall Street’s main indexes to another record close overnight, with the FOMO gnomes either complacent or totally ignoring the event risk into tonight’s FOMC policy decision. The S&P 500 rose 0.37%, the Nasdaq gained 0.34%, and the Dow Jones climbed by 0.39% with Pfizer and Avis star performers. US futures are steady in Asia.

Japan markets are closed for a holiday today, with Wall Street’s overnight gains lifting Asia cautiously higher ex-China and South Korea. The Kospi has fallen 1.15% this morning, as the Prime Minister said the government couldn’t afford another round of universal Covid-19 relief grants. Elsewhere, the picture is mixed. Singapore is 0.25% lower despite positive big bank earnings, and Kuala Lumpur is down 0.25% as lower oil prices and government tax measures weigh. Taipei has risen by 0.30%, with Jakarta up 0.15%, while Bangkok is flat.

China markets are mixed despite the positive Caixin Services PMI data today. That has a higher beta to the CSI 300 which has duly risen by 0.25% this morning, but the Shanghai Composite has fallen by 0.45%. Hong Kong has tumbled by 0.90%. China markets are reacting cautiously thanks to government warnings to households to stockpile essentials, and with tightening Covid-19 restrictions in parts of the country. Throw in two Evergrande offshore payments due on the 6^th, and an FOMC tonight, and there are not many reasons for mainland investors to be excited. China’s “national team” is likely to appear on the bid if the equity retreat accelerates, however.

Downunder, Australian yields and the Australian dollar have fallen after the RBA policy decision yesterday. That has shrugged off the gloom of lower iron ore prices and a Kiwi horse winning yesterday’s Melbourne Cup. With the RBA still in dovish mode, the ASX 200 has risen by 0.85%, with the All Ordinaries climbing by 0.80%.

We have probably seen the best of the gains to be had in Asia today already, as investors in the region adopt a cautious stance into the FOMC. US monetary policy has a very direct impact on the Asian market, especially with their plethora of dirty US dollar pegs. Similarly, European equities are likely to have a neutral open with an empty data calendar ahead of some blockbuster US releases culminating in the FOMC decision.

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