Record US highs lift Asian equities

Wall Street flies ahead of FOMC

The three main US indexes closed at record highs overnight as Markit and ISM PMIs remained strong along with US corporate earnings. A tariff deal between the US and Europe also gave investors another reason to cheer. The S&P 500 rose by 0.18%, while the Nasdaq closed 0.63% higher, and the Dow Jones climbed by 0.26%. The usual tech exuberance aside, it did appear that Wall Street was reigning in its animal spirits ahead of the FOMC meeting, even if that event isn’t enough to spark long-covering.

In Asia, that pre-FOMC caution seems to have arrived. Futures on all three US indexes are around 0.25% lower this morning, but that cautious note has yet to spread to Asian markets which are mostly buoyant on the Nasdaq rally overnight, and news from mainland China that both its coal supply crunch and coal prices seem to be easing. News that China has released some strategic oil reserves onto local markets has also given regional markets a tailwind.

The Nikkei 225 has fallen 0.45% after a mighty post-election rally yesterday. South Korea’s Kospi though, has leapt by 1.40%. Meanwhile, mainland China’s Shanghai Composite is 0.40% higher, with the CSI 300 rising by 0.25%. Hong Kong is having another rollercoaster day, after a beating yesterday, as the Hang Seng has soared by 1.0% today.

ASEAN is rather more cautious, with the Nasdaq’s outperformance overnight, as usual, drawing more attention to North Asia. Singapore is unchanged, while Kuala Lumpur has risen by 0.40% after getting a government tax beating yesterday. Jakarta is down 0.25% and Bangkok has fallen by 0.45%. Australian markets are in negative territory awaiting the RBA policy decision and a potential change in monetary guidance. The ASX 200 and All Ordinaries have fallen by 0.60%.

RBA fun and games in Australia aside, I am expecting markets in Europe and the US to adopt a more cautious note now as we await the FOMC policy decision overnight.

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