A positive day for Asia

Equities rally in Asia

Equities are rallying across Asia today after a strong overnight performance by Wall Street and a weaker US dollar in Asia relieving some Fed-taper pressures. With only Bank Indonesia’s policy-setting on the Asia calendar today, markets are being left to trade on sentiment, which seems universally positive this morning.

Overnight, US markets shrugged off weaker US Industrial Production data and a flattening US yield curve, indicating shorter-term inflationary pressures will continue rising. The fact that the flattening is occurring at the shorter end i.e., sub-10-years, and markets are not seeing the 10 to 30-tenors rising, has markets assuming that the Fed has the longer-term inflation outlook under control. Famous last words if any. Nevertheless, it’s as good a reason to be positive on stocks as any now, while we wait for further Q3 US earnings releases.

Wall Street closed in the green with the S&P 500 rising by 0.35%, the Nasdaq jumping by 0.85%, and the Dow Jones climbing by 0.10% with these more muted inflation expectations playing more powerfully with rate-sensitive technology stocks. In Asia, futures on all three are unchanged but that has not stopped Asia powering higher, ignoring yet another North Korea missile test.

The Nikkei 225 is up 0.70% with the South Korean Kospi rising by 0.65%. In mainland China, the Shanghai Composite is 0.70% higher, with the more tech-centric CSI 300 rallying by 1.0%. That also sees the Hang Seng 1.10% higher helped by Ali Baba’s cloud computing chip announcements.

Regionally, Singapore is 0.55% higher while Kuala Lumpur is closed today. Taipei has rallied 1.10% higher while Jakarta and Bangkok have eased by 0.50%, possibly due to the currency appreciation or a rotation back into the North Asia heavyweights. Australian markets remain in the green, although rising expectations of a change to RBA guidance seems to be limiting gains. The All Ordinaries rising by 0.25%, while the ASX 200 has recorded a 0.15% gain.

After a tough day yesterday, European stock markets should open higher this afternoon following the US lead. It will be interesting to see if the change in British and European rate expectations starts to weigh on equity valuations there eventually. It certainly is untrodden ground, especially for Europe. The intra-day direction in the US will be driven by Fed speakers and US earnings releases, with the data calendar second-tier today.

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