Equities, oil quiet in holiday trade

Thin Asian equity markets

With mainland China, Hong Kong, Taiwan and Australian markets away today, regional trading is muted, even cautious. Although the impressive US data on Friday propelled Wall Street to a strong finish, and with no notable news over the weekend, regional Asian markets have crept modestly higher.

On Friday, Wall Street lapped up falling bond yields and robust US data. The S&P 500 rose 1.18%, the Nasdaq leapt 1.76% higher, and the Dow Jones climbed by 0.53%. When cyclical rotation should have dominated, the Nasdaq’s outperformance, in particular, suggests that US equity markets are perhaps more sensitive to falling bond yields than global recovery plays for now.

In contrast, the Nikkei 225 has risen 0.80% this morning, while the Kospi remains unchanged. Singapore has climbed 0.80%, while Kuala Lumpur, Jakarta and Bangkok are unchanged. Liquidity is gravitating to Japan and Singapore at the expense of regional markets, and investors appear content to play wait-and-see until tomorrow. With Europe on holiday today, volumes will rapidly taper this afternoon in Asia.

Currency markets are quiet

Holiday-thinned trading conditions have left those Asian markets still often content to sit today’s session out on the side-lines. The US dollar index rose just 0.11% on Friday to 93.02, balanced between strong US data and infrastructure prospects and US long bond yields that unexpectedly fell quite sharply. In Asia, the index has edged 0.08% lower to 92.95 in non-descript trading.

Overall, the dollar index had a volatile week last week, ranging noisily between 92.85 and 93.45. The technical picture shows the index consolidating recent impressive gains despite the noisy tail-chasing ranges. Only a fall through 92.50, its 200-day moving average (DMA), suggests that the US dollar rally has run its course for now.

EUR/USD survived a test of 1.1700 last week, but its recovery ran out of steam ahead of 1.1800, and the single currency is trading at 1.1768 this morning. Those two levels remain the euro’s technical pivot points as the week starts. Likewise, GBP/USD has recovered to 1.3835 as the week starts but has yet to recapture its multi-month upward channel, which lies just above at 1.3870. Sterling’s outperformance versus the euro should resume this week as traders build the UK vaccination premium back into the EUR/GBP cross.

Despite the noisy US data on Friday, Asian regional currencies had a quiet session relatively. The fall in US bond yields did not result in an immediate Asian currency rally, with markets preferring to await the return of mainland China tomorrow.

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