Asian equities move modestly higher

Asian equities move modestly higher

US markets played catchup to the Asian rally overnight, posting very impressive results overnight. The S&P 500 rose by 2.38%, the Nasdaq leapt 3.01%, and the Dow Jones rallied by 1.95%. Some profit-taking is evident in Asia, though, with the markets taking a breather. The futures on all three indexes lower by between 0.20% and 0.30%.

Having led the world higher yesterday, by virtue of being the first region to open, Asian markets are only recording modest gains today, not helped by the US index futures also easing slightly. The exceptions are South Korea and Taiwan, who were on holiday yesterday. The Kospi has jumped by 1.86%, and Taipei is 1.60% higher. On Tuesday, South Korean and Taiwan Manufacturing PMI’s rose further into expansionary territory.

Elsewhere though, the picture is mixed for Asia, with some profit-taking evident after the strong outperformance yesterday. The Nikkei 225 is down 0.75%, with the Shanghai Composite 0.70% lower, with the CSI 300 down 0.85%.

Hong Kong has fallen by 1.0%, while Singapore and Jakarta have climbed by 0.25%, with Kuala Lumpur rising 0.75%. Australia’s ASX 200 and All Ordinaries are clinging on to 0.15% gains. Australian data was a mixed bag, as Current Account outperformed, but Building Permits collapsed with a decline of almost 20 per cent.

Notably, the biggest falls are in markets with the largest retail exuberance quota and suggest a temporary lull in momentum, not a structural turn in sentiment. European markets are likely to ease in sympathy as we all wait and see what mood Wall Street is in today when it arrives.

In the United States where the picture paints a rapidly recovering economy on all fronts. Shortly to be juiced by another USD1.9 trillion fiscal stimulus package. Inflationary pressures receding? I don’t think so, and if this Friday’s Non-Farm Payrolls will be a significant test for the economy. If NFP outperforms, equity markets may find themselves stress-tested again.

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