Asian equities set for a positive day
Wall Street had a sideways day overnight after the breathless Monday session. Asian markets are likely to take their cues from Europe instead, where the cyclical recovery rotation flows lifted local markets. That is a much more comfortable space for ASEAN markets than the wild tech-led exuberance of the US.
On Wall Street overnight, the buy everything gnomes paused for breath despite US bond yields easing. The S&P 500 edged 0.10% lower, the Nasdaq was almost unchanged, closing 0.05% lower, and the Dow Jones slipped 0.30%. US futures on all three have edged higher in Asia this morning, confirming the marching on the spot continues as the action occurs elsewhere.
The Nikkei 225 has risen 0.30%, with the Kospi 0.55% higher after Samsung lifted earnings guidance. Mainland and Hong Kong markets open shortly and should move tentatively higher initially. Singapore and Taiwan have risen 0.25%, with Kuala Lumpur rising 0.45% after underperforming yesterday. Australia’s ASX 200 and All Ordinaries have climbed 0.55%, with solid data, travel bubbles, firm commodity prices and travel bubbles giving local investors no reason to be negative.
The US dollar in full retreat
The global recovery sentiment was on full display in currency markets overnight, with the US dollar in a broad retreat led by the rally in the previously unloved euro. The dollar index fell 0.30% to 92.30, breaking support at 92.50. It has edged lower in Asia to 92.26, with its next support around the 92.00 regions. The dollar retreat was assisted by US yields easing across the curve, particularly in the longer tenors.
EUR/USD led the charge, rising 0.55% to 1.1875 overnight, just below its 200-day moving average (DMA). Sterling retreated 0.50% to 1.3835 as EUR/GBP buyers piled back into the cross after the EU announced an improved Eurozone vaccination outlook. Both the euro and sterling have broken out of falling wedge formations, and if the sentiment overnight continues, both should make gains over the coming days.
USD/JPY fell through 110.00 on its way to 109.60, a 0.40% decline. A fall through 109.35 could see the cross retreat to 108.50 in the sessions ahead, assuming recovery sentiment remains intact.
Notably, risk sentiment bellwethers, the Australian and New Zealand dollars, both finished the session almost unchanged at 0.7665 and 0.7060, respectively. Both have staged recoveries over the past week, and it may be that investors felt that better value lay elsewhere, in Euros, for example. Both remain deep in retracement territory and maybe a warning that the US dollar weakness may only be temporary.
