- Asian equities grind lower as coronavirus fears escalate in China.
- Mixed concerns over the Fed’s next moves challenge US Treasury bond yields amid sluggish session.
- Markets in Australia, Japan buck the bearish trend amid hopes that easy monetary policies will continue.
- Preliminary PMIs for November, FOMC Minutes and RBNZ Interest Rate Decision are the key events for the week.
Asian markets remain risk-averse during early Tuesday as fresh fears of Covid join indecision over the US Federal Reserve’s (Fed) next moves. Also likely to challenge the Asia-Pacific equities traders could be a light calendar at home and a cautious mood ahead of Wednesday’s top-tier data/events.
While portraying the mood, the MSCI’s Index of Asia-Pacific shares ex-Japan drop 1.60% intraday while refreshing a seven-day low. However, Japan’s Nikkei 225 cheers hopes of sustained easy-money policies even if the government jostles over defense spending. In doing so, the Nikkei 225 rises 0.70% intraday to around 28,140 by the press time.
Not only Japan’s Nikkei 225 but Australia’s ASX 200 also prints gains, up 0.70% around 7,191 at the latest, amid expectations that Reserve Bank of Australia (RBA) Governor Philip Lowe will reiterate the dovish words in today’s speech. It should be noted that downbeat prints of New Zealand’s trade numbers for October fail to please the equity buyers in Auckland amid hawkish hopes from the RBNZ.
However, fears of stringent COVID-19 lockdown in China and the likely strain on the global supply chain, as well as commodities, seem to challenge the sentiment in the region. That said, China reports the highest Covid cases in seven months on Tuesday. With this, stocks in China and Hong Kong print losses.
It’s worth noting that the indecision over the Fed’s next moves seems to challenge the bears amid recently softer US Treasury yields. The US 10-year Treasury yields print the first daily loss in four, down one basis point near 3.81% by the press time, as the latest comments from the Federal Reserve (Fed) officials fail to bolster the previously hawkish bias.
Federal Reserve Bank of Cleveland President Loretta Mester said in a CNBC interview, “I think we can slow down from 75 at the December meeting.” Previously, Atlanta Federal Reserve President Raphael Bostic also turned down the 75 bps move and challenged the DXY bulls. Additionally, downbeat prints of the Chicago Fed National Activity Index for October, to -0.05 compared to 0.17 prior, also weighed on the US Treasury yields. However, the previous week’s strong US Retail Sales and Producer Price Index (PPI) keeps traders on the edge.
Amid these plays, S&P 500 Futures print mild gains around 3,965 whereas prices of gold print mild gains amid the first negative performance by the US Dollar Index (DXY).
Moving on, Wednesday’s the Reserve Bank of New Zealand (RBNZ) monetary policy decision will precede preliminary readings of the monthly activity data and the Federal Open Market Committee (FOMC) Meeting Minutes to direct short-term market moves.