Asia’s COVID control tempers global stock selloff, U.S. futures jump

In this news, we discuss the Asia’s COVID control tempers global stock selloff, U.S. futures jump.

SINGAPORE / WASHINGTON (Reuters) – Asian stock markets fell on Thursday, but not as sharply as the overnight Wall Street rout, as oil rebounded and US futures surged, as the economic outlook brightest spots in Asia have offset investor concerns over new COVID-19 lockdowns in Europe.

The largest MSCI index of Asia-Pacific stocks outside of Japan fell 1%. Japan’s Nikkei .N225 fell 0.8%, and declines in Hong Kong .HSI, Sydney .AXJO, Shanghai .SSEC and Seoul .KS11 were less than 1.5%.

That’s heavy but much less than the 3.5% drop in the S&P 500 .SPX index or the 4.2% drop in the German DAX .GDAXI which took European stocks to their lowest level since the end of May. .

S&P 500 ESc1 futures and Dow Jones YMc1 futures rebounded 1%, which traders attributed to increased volatility and a less gloomy mood around Asia as China’s economy recovers .

“Asia is not really participating in this second or third wave story because it has its COVID largely under control,” said Rob Carnell, chief economist in Asia at Dutch bank ING.

“As a result, the national savings appear reasonable. Exports will remain weak… but at the national level, they are still doing well and doing much better compared to (Europe and the United States). “

Oil fell from a four-month low overnight and the risk-sensitive Australian and New Zealand dollars rose about a quarter of a percent.

Still, both currencies are, for now, headed for a weekly loss against the dollar, as is the euro, with concerns about the new lockdowns appearing to surprise investors.

In France, people will be required to stay at home from Friday, except to buy essentials, see a doctor or exercise. Germany will close bars, restaurants and theaters from November 2 to 30.

“Until yesterday, the market was traveling with the expectation that improving health services to deal with the pandemic would prevent the introduction of severe lockdowns,” said Rodrigo Catril, strategist at National Australia Bank FX, in a note.

“At least in Europe, that dynamic has now changed … the question now is whether American states will follow suit.”

FUNDAMENTALS

Central bank meetings and economic data will be the focus later Thursday, with growing uncertainty over the November 3 U.S. election also keeping investors on the lookout.

The Bank of Japan stands ready to maintain its massive stimulus package and commit to further action if the economic fallout from the virus threatens a return to deflation.

Investors expect the European Central Bank to delay the new measures and instead hint at action in December, which should contain the euro.

The common currency hit a 10-day low on the dollar and a hundred-day low on the yen overnight, before recovering slightly. He last bought $ 1.1751.

German unemployment and inflation data, European Confidence Surveys and leading US GDP figures will also be closely watched – the US figure is expected to show record growth, while leaving the economy where it started in 2020 .

“Any disappointment with these numbers may have a further impact on the market, given the current weakness,” said Michael McCarthy, CMC Markets strategist based in Sydney.

Investors are also increasingly wary of a contested US election outcome that could trigger a wave of risky asset sales.

Wall Street’s “fear gauge”, the Cboe .VIX volatility index surged Wednesday to its highest level since June and a jump in implied currency volatility indicates a wild ride is expected.

The one-week yuan implied volatility CNHSWO = hit a five-year high on Thursday.

The US bond market, however, was drowsy as investors looked past Election Day and believed huge government borrowing for coronavirus relief spending would occur regardless of who wins.

US 10-year benchmark yields US10YT = RR rose overnight and added about a basis point on Thursday to 0.7894%.

“Looking ahead, the heightened volatility heading into an election and even, potentially, post-election, will eventually subside,” said Seema Shah, chief strategist at Principal Global Investors.

“Markets will soon reaffirm a trajectory determined by fundamentals, rather than the flow of election news.”

Reporting by Tom Westbrook in Singapore and Pete Schroeder in Washington; Editing by Sam Holmes and Kim Coghill

Original © Thomson Reuters

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