Asian shares are showing a mixed picture on Tuesday after a volatile day in U.S. equity markets amid persistent concerns over the record number of new coronavirus cases worldwide and signs of an economic rebound. reports Reuters
- Australian S&P/ASX 200 futures lost 0.76% in early trading, Japan’s Nikkei 225 futures added 0.22%, and Hong Kong’s Hang Seng index futures rose 0.39%.
- E-mini futures for the S&P 500 rose 0.21%.
Spike Fueled By Vaccine Hope
Asian shares rose on Wednesday led by coronavirus vaccine hopes though sentiment was cautious after Beijing vowed retaliatory sanctions against the United States, while the euro rose to a four-month high ahead of a crucial EU summit.
- The signal for European markets was strong with futures for eurostoxx 50 up 1.3% while those for Germany’s DAX added 1.3% and futures for London’s FTSE climbed 1%.
- MSCI’s broadest index of Asia-Pacific shares outside Japan was last up 0.8%, not far from a recent five-month peak.
- Chinese shares sold off, with the blue-chip CSI300 index flat and Shanghani’s SSEC off 0.3%.
- Hong Kong’s Hang Seng index ticked up after spending most of the day in the red.
- Japan’s Nikkei and Australia’s benchmark index remained upbeat though, and were up 1.6% and 1.9%, respectively.
- E-mini futures for the S&P 500 gave back some of their gains but were still up 0.8%.
Consumers Optimistic?
After a strong start in the United States, equity markets sold off when California announced it was slowing the state’s reopening, shutting bars and banning indoor restaurant dining statewide in response to a surge in coronavirus cases.
But at the same time, U.S. consumers reported being more optimistic that the worst of their economic woes from the pandemic were behind them, complicating the picture for investors about the state of the world’s largest economy.
“The U.S. continues to report fresh highs of daily new infections. However, the seriousness of the disease is falling. Hospitalisation rates…has trended down since April,” said Kim Mundy with the Commonwealth Bank of Australia in Sydney, in an analyst note. “The upshot is the surge in infections does not give the full story. And it suggests the U.S. is learning to live with the disease.”
Tensions also grew between the U.S. and China over disputed claims to offshore resources throughout the South China Sea, with U.S. officials saying China’s claims were “unlawful.”
US-China Tensions & Vaccine Prospect
U.S. President Donald Trump on Tuesday ordered an end to Hong Kong’s special status under U.S. law to punish China for what he called “oppressive actions” against the former British colony, prompting a warning from China.
On Wednesday, China’s foreign ministry said in a statement Beijing will impose retaliatory sanctions against U.S. individuals and entities in response to the law targeting banks doing business with Chinese officials, though the statement released through state media did not reference Trump’s executive order.
“Hong Kong affairs are purely China’s internal affairs and no foreign country has the right to interfere,” the ministry said.
Overnight risk appetite was boosted by Moderna Inc’s experimental vaccine for COVID-19 which showed it was safe and provoked immune responses in all 45 healthy volunteers in an early-stage study.
On Tuesday, the Dow Jones Industrial Average rose over 2%, while the S&P 500 gained 1.34% and the Nasdaq Composite climbed 0.94%. [.N]
Stocks firmed despite rising Sino-U.S. tensions and three U.S. states reporting new record daily deaths from the pandemic.
“Markets have traded sideways for over a month as bulls and bears move their bishops and horses out on the chess board and then hoard them back in when the other side makes a move. The net result has been a prolonged stalemate,” said Perpetual analyst Matthew Sherwood.
“Forward-looking assumptions about COVID-19 treatments and vaccine offset what is happening today in terms of rising case numbers and an unwinding or stalling of re-opening plans.”
Weariness in Investors
There were signs of wariness among investors, as yields on leading U.S. and euro zone government debt fell and safe-haven gold prices solidified gains above $1,800 an ounce.
- Spot gold rose to $1,809 an ounce.
- On Monday, the S&P 500 dropped 0.94% after touching its highest level since Feb. 24 earlier in the trading day.
- The tech-heavy Nasdaq Composite dropped 2.13%, driven by declines in some outperforming big names, including Amazon and Microsoft.
- The Dow Jones Industrial Average rose 0.04%.
- MSCI’s gauge of stocks across the globe briefly touched its highest level since February, before ending down 0.29%.
- Growing concerns over the coronavirus spread and simmering U.S.-China tensions also weighed on oil.
- Brent futures fell 52 cents, or 1.2%, to settle at $42.72 a barrel.
Oil prices rose on Wednesday after a sharp drop in U.S. crude inventories. Brent crude futures were up 24 cents at $43.14 a barrel, and U.S. crude futures rose 22 cents to $40.50 a barrel. [O/R]
US Dollar Lower
The U.S. dollar edged lower on Monday as investors looked to U.S. corporate earnings and upcoming retail data to gauge whether guarded optimism on the economic outlook was justified.
The dollar was on the defensive, particularly against risk-sensitive currencies, following news of progress in vaccine development. The single currency has been helped by hopes the European Union could agree at its summit later this week on a rescue financing package that will limit the economic damage to the bloc from the pandemic.
The euro went as high as $1.1423, its strongest since March 10 and not far off its peak so far this year of $1.1495. It was last at $1.1395.
The yen was little moved at 107.21 per dollar, off a two-week high of 106.635. The Bank of Japan kept monetary policy steady as expected, though it warned that uncertainty over the economic outlook was “extremely high” due to various risks, including rising coronavirus infections in the capital Tokyo. The risk-sensitive Australian dollar, too, pared gains to be last up 0.2% at $0.6990.
China To Report Trade Numbers
In upcoming data, China is set to report Tuesday its trade numbers, with a slump in China’s exports likely easing in June while imports contracted less sharply on higher crude oil and commodities purchases, according to a Monday Reuters poll.
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Source: Reuters
