Festive season dominates Asian markets

With Hong Kong and Australia closed today, along with the UK this afternoon, and a number of secondary locations, it is hardly a surprise that Asian markets are quiet today. The weekend headline newsreel was relatively quiet. Omicron cases are surging in the US and Europe, and although markets have well and truly priced in a less virulent strain, the disruption to goods and services from isolating workers, notably air travel, seems to be the main fallout so far. That is only likely to cause short-term nerves, with the global recovery story for 2022 still on track. The divergence between Brent and WTI this morning can likely be laid at that door.

In China, Industrial Profits rose by a healthy 38% (YTD) YoY Nov versus 42% for October, but well above the forecast 34%. Uncertainty in the property sector continued to be a drag in otherwise broadly strong data sector-wise. On that note, the PBOC on Saturday said that they would safeguard the legal rights of home buyers and provide greater support for the real economy. The targeted stimulus is a theme in recent times from China, as opposed to previous stimulus strategies. Reuters also reported that Evergrande had made progress restarting home construction and that its chairman said it would deliver 39,000 units in December. That batch of positive news, though, is being offset by increasing omicron cases in China, leaving markets in a holding pattern.

The data calendar globally, is unsurprisingly, fairly thin this week, especially for tier-1 releases. Headlines will continue to dominate intraday moves in thin trading. For Asia, the highlight will be on Friday when China releases official Manufacturing and Non-Manufacturing PMIs. The recent fall in industrial commodity prices should boost Manufacturing, while Non-Manufacturing looks vulnerable to downside risks around consumer sentiment and virus restrictions.

Otherwise, experience tells me this week will be a feast or a famine, with little in between. Either the headline reel will spur ugly intraday moves on holiday-thinned liquidity, or volatility will remain so flatline, that if it were an ECG, the doctors and nurses would be yelling code blue. In the meantime, pondering how to make the best use of Christmas leftover food may be a more productive course of action.

On one final note, I would like to acknowledge the passing of Arch Bishop Desmond Tutu over the weekend. I had the privilege of spending a couple of hours with him as part of my MBA in Cape Town in 2014. A formidable intellect, a kind heart, a patriotic South African and a great sense of humour was my overriding impression. I know this as he made me stand in the corner facing a wall for a while for being a Kiwi, as penance for the All Blacks beating the Springboks in rugby. He gave his heart to try to heal South Africa and gave more to society as a whole than he ever took. We need more people like him in the world. R.I.P Archbishop Tutu, it has been an honour.

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