Investors reduced exposures overnight on Wall Street ahead of today’s FOMC outcome, and Asia looks like it is doing much the same. Yesterday the S&P 500 finished 0.20% lower, with the NASDAQ unwinding Monday’s gains as it fell by 0.71%. The Dow Jones continued edging lower, falling 0.27%.
US futures are slightly lower in Asia, with bourses across the region following Wall Street mostly lower in sympathy. The Nikkei 225 has fallen 0.30% today, but the KOSPI has risen 0.60% to new record highs led by technology-related heavyweights. China markets are retreating once again as the PBOC declined to add liquidity at the reverse repo, and concerns over China’s announcement to impose new measures to clamp down on the shadow banking sector yesterday, requiring savings products to be held in AA+ assets.
Given that much of those funds get funnelled into property developers, that sector took a bath yesterday. That, rather than nuclear power plant nerves, may have been the main reason for China’s equity markets posting declines yesterday. The Shanghai Composite is 0.37% lower, with the CSI 300 down 0.70%, while Hong Kong has eased by 0.35%.
Regionally, Singapore has fallen by 0.65%, with Kuala Lumpur and Jakarta edging 0.15% higher, with Taiwan and Bangkok unchanged. In Australia, markets are modestly green, with the ASX 200 and All Ordinaries and ASX 200 rising 0.30%, boosted by energy stocks and momentum buyers after the ASX 200 breached 7,400.00.
The KOSPI and ASX 200 have attracted momentum buyers as both indices breached previous all-time highs; however, the picture is more mixed across the region, if sedate. Europe is likely to follow the same reasoning and look to reduce risk into the FOMC meeting. Assuming no surprises and the FOMC remains suitably dovish, I can see no reason why the gentle rally in equity markets will not resume into the remainder of the week.
Aside from the FOMC meeting, US President Biden meets Russian President Putin in Geneva today. It is unlikely anything market-moving will emerge, but any geopolitical process will a marginal positive.