Monday, September 14, 2020

Asia Times: Asia starts the week green thanks to the selloff in US equities easing, and rising optimism for a vaccine

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  • Dollar
  • Gold
  • Yen
  • Euro
  • Pound
  • Stocks
  • Oil

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Market Recap: Asia starts the week green thanks to the selloff in US equities easing, and rising optimism for a vaccine

US equities ended last week mixed as the downside correction continued to ease and be limited to mostly tech sector stocks. Movement in the stock market continues to suggest profit taking as investors shift away from tech and tech-related stocks, with the Nasdaq falling while the Dow and S&P500 managed to edge out a slight gain on Friday. Stimulus worries may have also put downward pressure on equities in the US, as it looks increasingly unlikely that a stimulus bill will be able to be passed in the near future as parties focus on the upcoming presidential elections. That said, both the VIX and VXN fear gauges fell on Friday, signalling that the selloff continued to ease as we approached the end of the week. As a result, investors will likely be more heavily focused on movements this week for further signals on whether the market is in a transition towards a deeper reversal or if we have approached the end of a downside correction.

Indexes Daily Change (%) Net Change Closing Price
Dow +0.48% +131.06 27,665.64
S&P500 +0.05% +1.78 3,340.97
Nasdaq -0.60% -66.05 10,853.54
*Source: Bloomberg

Most sectors in the S&P500 traded higher on Friday, with industrials leading gains thanks to a rotation towards underperforming sectors. Airlines were among the losers on Friday however, as we see performances shift more towards less popular industries including textiles and apparels, power and renewable electricity, and aerospace and defence. Tech led losses in both the S&P500 and DJIA. In company news, Peloton's shares reversed early gains to lose 4.23% despite reporting a 172% surge in revenue from a year earlier to US$607.1 million. The company also beat analyst estimates for both profits and revenue in the reported quarter, as well as the upcoming quarter. Peloton's stock performance mirrors that of other companies that has beat estimates in the past two weeks, including cyber security firm CrowdStrike, signalling that investors continue to cut positions on companies that have outperformed over the period of the pandemic despite beating expectations (Peloton’s stock is still up 330% since bottoming out in March despite Friday’s 4% drop).

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Mixed weekly index performance suggests a stronger inflow into the EMEA region. Major US indices suffered a second weekly loss, the most for the S&P500 since mid-June, with the index erasing three weeks of gains during the two-week decline. In contrast, the FTSE100 had its best weekly performance since early June, likely thanks to a weaker sterling in addition to a boost from a stronger rotation into stocks in the region with a larger focus on global trade. Asian indices were mixed, but most indices in the region still outperformed US major indices.

Indexes Weekly Change (%) Net Change Closing Price
Dow -1.66% -467.67 27,665.64
S&P500 -2.51% -85.99 3,340.97
Nasdaq -4.06% -459.59 10,853.54
FTSE100 +4.02% +233.01 6,032.09
Dax +2.80% +360.18 13,202.84
Stoxx +1.69% +55.22 3,315.81
Nikkei +0.87% +201.06 23,406.49
CSI300 -3.00% -142.94 4,627.28
KOSPI +1.20% +28.44 2,396.69
ASX200 -1.12% -66.09 5,859.42
HSI -0.78% -192.14 24,503.31
STI -0.78% -19.55 2,490.09
*Source: Bloomberg

Most currencies in the G10 basket gained against the dollar, as a reduction of risk aversion was seen in the forex market as well. Sterling fell slightly against the greenback, as the currency continued to selloff on increasing tension between the EU and UK on the Brexit front. We may continue to see sterling decline as a result of intensifying Brexit talks between both sides as we approach the supposed target date in October that the EU and UK is targeting for a more solidified post-Brexit trade agreement. This is due to limited progress on key issues surrounding talks, as well as the UK's decision to proceed with plans to rewrite the Brexit Withdrawal Agreement.

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Safe haven assets were mixed, but appeared to be tilted towards the downside on Friday. Gold fell but still managed to end with a weekly gain. The Japanese yen weakened against both the greenback and the euro. US Treasuries rose across the board, but it may be due to increasing concerns on how the Fed plans to drive inflation expectations. Benchmark 10-year yields were 1.1bps lower at 0.67%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold -0.28% -5.54 1,940.55
Silver -0.55% -0.15 26.73
USD/JPY +0.03% +0.03 106.16
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year -1.2bps 0.13%
10-Year -1.1bps 0.67%
30-Year -0.7bps 1.41%
*Source: Bloomberg

Oil futures were mixed on Friday as the selloff in oil markets eased slightly. OPEC+ is set to meet later this week (on September 16th and 17th) to discuss the state of the energy market amid increasing demand pressures while the bloc is in an output limit tapering cycle. We've also started to see some OPEC members cut pricing of crude oil products to Asia for October, to help with the weakening demand as refiners suffer from low margins. In addition, with Libya expected to restart crude oil production and exports after an eight-month blockade, crude oil supply is starting to look increasingly likely to put additional pressure on crude oil prices in the short-term when coupled with faltering demand. Oil traders will hence likely be focused on the bloc's monthly review for a decision on a continuation of tapering down production limits that it started in August. Oil prices today may find some support from some positive vaccine news over the weekend, with AstraZeneca announcing that it had restarted trials for its experimental vaccine while Pfizer CEO Albert Bourla said on Sunday that it is likely that the US will deploy a Covid-19 vaccine to the public before the end of 2020.

Oil Futures Daily Change (%) Net Change Closing Price
Brent -0.57% -0.23 39.83
WTI +0.08% +0.03 37.33
*Source: Bloomberg

Stocks in Asia were trading higher on Monday morning, as stocks start the week on a more positive note thanks to selloff in US equities easing on Friday and as optimism for a vaccine grew over the weekend. The Nikkei, KOSPI and the ASX200 were all trading higher in the early hours of Monday's trading session. Futures tracking major indices in the US were also trading higher, with a strong skew towards the tech sector as the Nasdaq 100 e-mini futures were trading more than 1% higher as of 9.02am (GMT +8). The Nikkei may experience some muted trading today as Japan's Liberal Democratic Party is set to vote today on Shinzo Abe's successor, who is then highly likely to be chosen as PM by parliament on Wednesday. Chief Cabinet Secretary Yoshihide Suga appears to be the favourite to win the vote, and this is likely priced into financial markets as well, along with expectations for Suga to mostly maintain Abe's policies.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei +0.56% +130.79 23,537.28 8:52:35 AM
KOSPI +1.09% +26.49 2,423.18 9:12:30 AM
ASX200 +0.43% +25.58 5,885.00 9:12:15 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures +0.77% +212.00 27,705.00 9:02:33 AM
US Futures +0.82% +27.50 3,350.75 9:02:35 AM
Nasdaq 100 Futures +1.03% +114.50 11,162.75 9:02:32 AM
*Source: Bloomberg

Economic releases for the day ahead include (all timings in GMT +8):

  • Japan Industrial Production (F) (12.30pm)