Asian equities drift higher
A quiet day on the US bond market was enough to tempt the herd back into action, with the S&P 500 rising 0.65%, the NASDAQ jumping 1.05%, and the Dow Jones climbing 0.53%. US futures on the NASDAQ have advanced 0.30% in Asia, with the other indexes unchanged.
The overnight price action greenlighted a positive day in Asia, albeit a relatively calm one, with Asian markets content to wallow in wait-and-see-mode. The Nikkei 225 and KOSPI are 0.55% higher, with the Shanghai Composite and CSI 300 rising 0.30%.
Hong Kong has risen 0.65%, while Singapore, Kuala Lumpur, and Jakarta see profit-taking, leaving them unchanged after previous solid sessions. The ever-optimistic Australian markets are the region’s outperformers; both the ASX 200 and All Ordinaries are 1.0% higher after the RBA minutes were suitably dovish.
Asia’s positive session will set European markets up for a positive start. However, the suspension of the AstraZeneca (NASDAQ:AZN) vaccinations across the bloc and a resurgence of new infections in parts will temper the gains. Overall, equity markets seem content to follow Wall Street’s lead cautiously ahead of the FOMC meeting outcome.
The US dollar strengthened overnight, despite a slight easing in US yields and a strong US stock market. The dollar index finished the day 0.16% higher at 91.69 and remains unchanged in Asia. EUR/USD eased to 1.1935 overnight on Covid-19 issues and looked set to retest 1.1900 as the G-7’s weakest performer overnight.
The US dollar strength in the face of previously mechanical correlations to US yields is interesting. It may suggest that currency markets more deeply feel worries about the FOMC now. That makes sense, given the world spent all of 2020 selling the greenback and is still structurally short.
Given that the US dollar did not fall with yields overnight, it is not unreasonable to think that it will therefore rise if the US yields spike; the upside being the weakest side right now.
Asian markets were in suspended animation today, with both regional and major currencies almost unchanged from their overnight closes. A lack of new directional pushes leaves Asia content to watch developments in other time zones.