Asia follows Wall Street lead with gains

Debt-ceiling offer tempts Asian equities higher

Asian equity markets are to a positive start today after hopes of a US debt ceiling compromise saw Wall Street sharply reverse losses overnight and move into positive territory. The S&P 500 finished 0.41% higher, the Nasdaq closed 0.47% higher, and the Dow Jones ended 0.30% higher overnight. Interestingly, the US rally continues vigorously in Asia, with US index futures staging powerful gains. Nasdaq futures have jumped 0.75% higher, while S&P 500 and Dow futures have climbed by 0.50%. No one wants to be the FOMO-gnome left behind in US markets.

The strong showing by US markets has been enough to lift animal spirits in Japan and South Korea, which have shown a high correlation to Wall Street of late. The Nikkei 225 is 0.95% higher, while the Kospi has leapt 1.55% higher today. Mainland China remains closed until tomorrow, but Hong Kong is also rallying powerfully today, with Evergrande stock resuming trading. News that the Hong Kong Government will build 90,000 new homes has been received positively and the Hang Seng has leapt 2.15% higher today.

Singapore has climbed by a healthy 0.90% with Taipei up only 0.15%. Gains in Taiwan are perhaps being limited because China’s President Xi is due to make a speech about the island on Saturday. Bangkok has jumped 0.95% higher while Jakarta is 0.40% higher ahead of an important tax law vote today. Falling oil prices have pushed Kuala Lumpur down by 0.20%, while Manila is 0.50% lower.

Australian markets have only rallied modestly, with New South Wales reopening news offset by lower energy prices overnight and the tightening of mortgage lending criteria by the prudential regulator. Still, markets down under are in the green, the ASX 200 and All Ordinaries climbing by 0.55%.

After a horror story day yesterday for European equities, which missed out on the goodies dangled by McConnell and Putin, markets are likely to rebound sharply today. Given the headline-driven nature of the equity moves we have seen this week, I would suggest caution though. We are only one negative headline away from the herd stampeding back the way it came. President Putin’s gas offer was high on rhetoric and short on execution details, and a Democrat rejection of the Republican short-term debt ceiling extension could see normal service resuming.

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