Equities respond to FOMC with gains
Asian markets are mostly higher after a suitably dovish FOMC lifted US equities to a positive close. Overnight the S&P rose by 0.29%, the Nasdaq by 0.40%, and the Dow Jones by 0.59%, reversing earlier session losses. Aftermarket futures rose initially in Asia but have since given back most of those early gains.
That has taken the edge of the initial Asia rallies but still leaves most markets in the green today. The Nikkei 225 is 0.80% higher, with the Kospi up 0.90%. The Shanghai Composite and CSI 300 have rallied by 0.50%, with IPO fever boosting Hong Kong by 1.40%. Singapore is 1.20% higher, Manila by 1.25%, with Jakarta climbing 0.85% and Kuala Lumpur up 0.45%. Cyclical markets, once again, showing resilience.
Today’s blowout employment numbers in Australia have seen a spike in government bond yields, notably in the liquid 10-year tenor. That has taken the edge of Australian markets, which are increasingly concerned that the RBA will have to withdraw some part of its easy monetary policy sooner rather than later. That has pushed the ASX 200 0.70% lower, with the All Ordinaries edging down by 0.30%.
Although the initial post-FOMC exuberance has ebbed, something I note with interest, the momentum has still been enough to see Asia to a positive day. It should also be enough to ensure that Europe also opens higher, especially as cyclical markets are doing well in Asia today. However, the price action suggests that equity markets have not yet shaken off their higher yield hoodoo. Wall Street could be vulnerable to another move higher on the yield front this evening.
US and China officials are meeting in Alaska today, the first official engagement between the two sides since President Biden took office. Biden shows every sign of being as tough on China as his predecessor, and China, for its part, shows no sign of retreating from stop messing with our internal affairs position. It never hurts to talk, but I expect nothing market-moving to emerge from the high-level meeting.
