Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

Asia Session: Equities March Higher On Positive Trade Headlines; Yields Fall

By MarketPulse (Jeffrey Halley)Market OverviewMay 08, 2020 01:58AM ET
www.investing.com/analysis/asia-session-equities-march-higher-on-positive-trade-headlines-200524019
Asia Session: Equities March Higher On Positive Trade Headlines; Yields Fall
By MarketPulse (Jeffrey Halley)   |  May 08, 2020 01:58AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
SIAL
+0.31%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
PYPL
-0.02%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
PHDOW
+0.80%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CSI300
+1.91%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USO
-0.29%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
SSEC
+1.94%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Asian financial markets are enjoying a positive day as Wall Street continues to ignore bond market warnings, or warnings anywhere else for that matter, and more positive headlines rolled out in trading this morning. China and US trade ambassadors enjoyed a positive call today, reiterating the commitment from China to meet its obligations under the Phase-1 trade agreement signed earlier this year. That will be of substantial relief to markets, as the last thing the world economy needed right now, was an escalation in hostilities on that front. To be fair to China, they have two years to meet the commitment, a detail that appears to over often be overlooked. And COVID-19 has most definitely put a spanner in the works these past months.

Australia too had positive news with Prime Minister Scott Morrison announcing the intention for the economy to reopen in stages up until early July. More importantly, he stated that Treasury forecasts suggest that 850,000 jobs will return quickly once restrictions domestically end.

US Initial Jobless Claims yesterday saw another 4.174 million American’s heading to the jobless queues for the weekand of itself, a disastrous number, but in the strange times we live in, it was less than the 5 million of the previous weeks. Thus, given a falling coronavirus death toll, markets construed this as a positive trend and that America is “flattening the curve’ on the jobless front.

PayPal (NASDAQ:PYPL) shares soared 14.0% overnight, in another win for big-tech, which as a sector, continues to outperform as the winner in the battle with legacy companies in the COVID-19 world. That boosted the NASDAQ, which has now unwound nearly all of its coronavirus sell-off. The peak virus reopening trade continues to subsume the carnage on the street in the real world.

The US bond markets, ever a bastion of caution, continues to take a somewhat more negative “forward-looking” view of the work. US Fed Funds futures pricing in the possibility of negative rates next year and the US 2-year note hit a record low yield. Clearly, bond markets do not share the rosy outlook of equity and energy markets. The US government’s galactic levels of debt raising requirements, will sensibly, be concentrated in the long end of the curve, hinting that the curve itself will steepen markedly in the months to come. I believe both equity and bond markets are incorrect to some extent. Inflation, and if things don’t go to plan, stagflation are the more likely outcomes of the coronavirus pandemic. But that will be a story for another day.

Most of Europe is on holiday today, which will dampen volatility in Asia. Tonight’s highlight will be the US Nonfarm Payrolls which are expected to plummet by a mind-boggling 22 million jobs. That fall, though has been well telegraphed by the drop in the weekly employment numbers over the past month. Therefore, terrible as the number will be, its impact on markets is almost certainly fully priced in.

Overall, financial markets continue to disconnect themselves from reality on the ground under the pretext of forward-looking genius. I have severe doubts about the wisdom of that thesis. What cannot be denied, however, is the momentum of the peak virus trade right now. The ayes have it and will continue to do so for the near future at least, making top picking a dangerous game. If you are not in the peak virus camp, sitting on the side-lines and looking forward to the weekend will be the best way to preserve capital.

Equities march higher in Asia as the positive headlines roll in

Wall Street had another positive day, boosted by big-tech and the peak virus trade, and record low yields at the short end of the US curve. The S&P 500 rose 1.15%, the NASDAQ leapt 1.40% with the Dow Jones climbed 0.90%. In aftermarket futures trading, both the S&P mini and NASDAQ futures have surged 1.20% in Asia.

Asia started the day positively on the back of Wall Street, with positive US-China trade communications, and a timetable for reopening Australia further boosting equity markets regionally. The Nikkei 225 has climbed 2.0% with the Korean KOSPI up 1.15%. Mainland China’s Shanghai Composite is 0.90% higher, and the CSI 300 has risen 0.60%.

Singapore continues to lag, up only 0.20% today. The index has been dragged lower by Singapore Airlines (SI:SIAL) announcing its first-ever yearly loss, complicated ironically, by fuel hedging losses. HDB property transactions fell nearly 80% in April, and the commodity trading sector continues to be rocked by scandals.

That left Singapore lagging as both Kuala Lumpur rose 1.20% and the Hang Seng rose 0.90%. The Australian All Ordinaries has increased by 0.90% and the ASX 200 by 0.85%. Jakarta and Manilla are down 0.20% as economic worries and a continuing climb in coronavirus cases cloud both countries' outlooks.

With Europe closed, Asian equity trading will likely wind down to a quiet finish. Asia’s laggards, Indonesia, Philippines and Singapore, will continue to underperform as each grapple with specific national issues. For the rest of the region though, the peak virus trade continues to boost positive momentum, and I see no reason why that will not continue into North American trade later today.

The US Dollar retreats on falling US and “peak virus”

The US dollar continued its retreat overnight as the US yields out to the 10-year tenor all continued falling, and in the case of the 2-year Note, hit record lows. The US Dollar Index fell 0.20% to 99.89 with both majors and developing markets gaining versus the greenback.

The main driver, though, has been the more positive risk environment as Europe, the US and parts of the Asia Pacific continue with plans to reopen their economies after coronavirus lockdowns. The perception that peak virus is behind us has seen a rotation into emerging markets currencies and out of the haven Dollar.

As stated, the bad news from today’s Nonfarm Payrolls is priced in and unlikely to derail the risk-on trade unless we have a blow-out number closer to 30 million. It is a strange world that we live in, when a drop in employment from the 22 million jobs expected, to say 30 million jobs, would be considered a blow-out result. With potential trade concerns receding this morning, the short-term momentum is still with the global recovery trade, and the US Dollar should continue to give ground into the week’s end.

Oil recovers some of its losses in Asian trading

Oil saw profit-taking sellers emerge overnight after an impressive rally over the past week, and ahead of US data this evening. Brent crude falling 2.0% and WTI falling 3.50%. The apparent de-escalation of potential trade hostilities from this morning US-China phone call has seen bullish sentiment return to both contracts. Brent crude rising 1.40% to $29.90 a barrel, and WTI increasing 1.50% to $23.90 a barrel.

Even more so than equities, oil has a vast amount of good news priced into it. Both contracts are dabbling with their 50-day moving averages at these levels. Indeed, those 50-days have capped gains on both over the past three trading sessions. The inability of either contract to close above their moving averages is a slight concern and suggests that short-term momentum may be waning. Investors should tread lightly and be wary of bullish exuberance at these price levels for now.

Gold rallies impressively but is still stuck in its range

Gold rallied by 1.80 % overnight to $1715.50 an ounce, as both the dollar and US Treasury yields fell. The 30-dollar rally, although impressive on paper, still leaves gold stuck in the middle of its one-month range between $1650.00 and $1750.00 an ounce.

It is essential to separate short-term momentum, flip-flopping sentiment and day-to-day noise from structural moves. Gold has had a lot of the former for the past month, and very little of the later. Until gold closes above or below the extremes of its one-month range, trading should remain the preserve of the intra-day trader. Golds fundamentals are screaming for higher levels to come, possibly much higher, but it must navigate the doldrums first. Patience is required.

Original post

Asia Session: Equities March Higher On Positive Trade Headlines; Yields Fall
 

Related Articles

Asia Session: Equities March Higher On Positive Trade Headlines; Yields Fall

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Jane Comita
Jane Comita Oct 05, 2022 10:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
❤️❤️❤️
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email