Divergence Between Asia-Pacific Shares, US Stock Market Opens Door to Volatility

The major Asia stock markets are diverging with the U.S. equity markets overnight suggesting global investors may need to begin bracing for a volatile week.

Hong Kong stocks are leading the gains in the Asia-Pacific region early Monday as China’s trade data fell far short of expectations, marking the first annual decline in exports since May 2020. Meanwhile, U.S. stock futures fell on Sunday as investors looked ahead to a week packed with the Congressional mid-term elections, as well as the latest consumer inflation report.

Asia-Pacific Performance

At 05:00 GMT, Japan’s Nikkei 225 Index is trading 27540.34, up 340.60 or +1.25%, Hong Kong’s Hang Seng Index is at 16714.57, up 553.43 or +3.42% and Korea’s KOSPI Index is trading 2371.73, up 23.30 or +0.99%.

In China, the Shanghai Index is at 3084.87, up 14.08 or +0.46% and in Australia, the S&P/ASX 200 Index is at 6927.40, up 34.90 or +0.51%.

China’s October Exports Marks First Year-on-Year Drop Since May 2020

China’s exports in U.S. Dollar terms fell 0.3% in October from a year earlier, significantly missing expectations for an increase of 4.3% in a Reuters poll and a steep decline from 5.7% growth in September.

Imports also fell 0.7%, missing forecasts for a 0.1% gain from a year earlier after rising 0.3% in September.

The decline in U.S. Dollar terms last month marked the first year-on-year drop since May 2020, according to Refinitiv Eikon data.

China’s Restrictive COVID Policy is the Wildcard

Last week, Chinese and Hong Kong investors pumped a trillion dollars into the market on hopes of a reopening in the world’s second-biggest economy.

There’s going to be a big payoff if they are right, but over the weekend, Chinese official reiterated their commitment to a strict COVID containment approach, dashing hopes for a quick re-opening of the economy.

China will persevere with its “dynamic-clearing” approach to COVID-19 cases as they emerge, health officials said on Sunday.

Asian Investors Betting on Easing of COVID Curbs, US Investors Taking Protection Ahead of Elections

Today’s price action suggests traders should prepare for heightened volatility because of the divergence in the Asian and U.S. equity markets.

While we realize that reopening of the economy in China and the easing of COVID restrictions is likely to be a bullish event, or as Goldman Sachs stated in a note to clients “Chinese stocks could rally 20% on and before the reopening”, there are other headwinds in the global economy that could derail the rally.

In the U.S., for instance, investors will be focusing on the mid-term elections and their potential impact on U.S. economic policy. And Thursday’s consumer price inflation (CPI) report that is likely to play a major role in the direction of Fed policy.

Even if China were to relax its restrictions 2 or 3 months down the road, there is still the possibility that China’s economic growth next year could fall on expectations of falling demand from the U.S. and the European Union. This could trigger a drop in China exports in the neighborhood of 2% or more.

For a look at all of today’s economic events, check out our economic calendar.

Asia-Pacific Markets Mixed after North, South Korea Fire Missles; Traders Glued to Fed Rate Decision

The major Asia-Pacific stock indexes are trading mixed on Wednesday as investors braced for the U.S. Federal Reserve’s monetary policy and interest rate decisions, due to be released at 18:00 GMT. The Fed is widely expected to raise its benchmark rate by 75-basis points, but the market moving event will be its decision to remain hawkish or signal a slowdown in future rate hikes.

Traders are also braced for the Fed to end rate hikes in March at a level of 5%, and market pros say a more hawkish Fed could trigger a violent reaction in the stock market, according to CNBC.

Furthermore, Fed Chair Jerome Powell is expected to sound somewhat hawkish in his post-meeting briefing Wednesday and emphasize that the Fed’s goal is to crush inflation, CNBC wrote.

At 04:58 GMT, Japan’s Nikkei 225 Index is trading 27642.13, down 36.79 or -0.13%. Hong Kong’s Hang Seng Index is at 15724.23, up 268.96 or +1.74% and South Korea’s KOSPI Index is trading 2334.85, down 0.37 or 0.02%.

In China, the Shanghai Index is trading 2995.26, up 26.06 or +0.88% and Australia’s S&P/ASX 200 Index is at 6989.00, up 12.10 or +0.17%.

North Korea Fires Missile Barrage

Defense-related stocks listed in South Korea and Japan rallied after military officials in Seoul confirmed North Korea fired more than 10 types of missiles off its eastern coast.

The volley of missiles included one ballistic missile that landed in the free waters on South Korea’s side of the Northern Limit Line, a defacto sea border that separates the two Koreas – the first instance since the Korean War, authorities said.

Shares of defense companies Hanwha Aerospace jumped more than 5% in Korea’s morning trade, and Victek climbed more than 7%.

Japanese defense stocks were trading slightly higher with Hosoya Pyro-Engineering up nearly 1%.

Daily Forecast

Traders are monitoring the situation with North Korea very closely but so far, the missile launches haven’t had much of an effect on the direction of the markets. Some companies are benefiting from the military activity, but most traders are keeping their powder dry ahead of the Fed because of uncertainty over whether the central bank will announce the start of smaller rate hikes in December.

The financial markets widely expect the Fed to go big for the fourth straight time, but it’s mixed on the size of the hike in December.

Global equity markets starting with the U.S. could rally if the Fed announces the slowdown, but they could get crushed if Federal Reserve Chair Powell comes across as hawkish in his quest to beat down soaring inflation.

For a look at all of today’s economic events, check out our economic calendar.

Asia-Pacific Shares Move Higher as Investors Bet on Fed “Pivot”

The major Asia-Pacific stock indexes are mostly higher on Monday as traders shrugged off China manufacturing and non-manufacturing data that missed expectations, and as investors look ahead to the U.S. Federal Reserve meeting later this week. Traders said the markets were mostly supported by hopes that the Fed might sound less aggressive about future rate hikes later this week.

Gains are being posted in Japan, Hong Kong, South Korea and Australia, but China stocks fell following the weak economic data.

Hong Kong’s Hang Seng Index was up 0.89%, while gaming stocks rebounded following news of an e-visa system for Chinese residents traveling to Macao. In mainland China, the Shanghai Composite was off by 0.03%, CNBC reported.

Factory Activity in China Shrank in October, Missing Expectations

China’s factory activity shrank in October compared with September, data from the National Bureau of Statistics showed.

The official manufacturing Purchasing Managers’ Index print came in at 49.2, missing expectations for a reading of 50 – the mark that separates monthly growth from contraction. In September, the PMI reading stood at 50.1.

China’s official non-manufacturing PMI came in at 48.7, compared with a print of 50.6 in September.

China Residents Will Be Able to Travel to Macao Using E-Visa Starting November 1

China’s immigration bureau said mainland residents will be able to travel to Macao from Nov 1 using an online visa system rather than in-person applications, a move that could increase travel to the world’s largest gambling hub.

But the easing of visa rules comes just as Macao’s government itself has reinstated some tough Covid curbs after a handful of cases were detected there in recent days after no infections for more than three months.

Japan Industrial Production Drops for the First Time in Four Months

Japan’s industrial production fell 1.6% in the month of September from August, government data showed, falling more than expectations of a 1% drop in a Reuters poll and ending a three-month growth streak.

Retail Sales in Australia Rise 0.6% in September

Australia’s retail sales rose 0.6% in September from August, official data showed, in line with expectations in a Reuters poll and at the same pace reported in the previous monthly period.

Short-Term Outlook

Asia-Pacific shares performed well despite mixed-to-bearish economic reports in the region as investors continued to bet on a softer-tone from the U.S. Federal Reserve on Wednesday.

Shares were lifted most of last week on speculation over the timing of a Fed pivot. Following its Nov 1-2 policy meeting, the Fed is expected to raise rates for the fourth-straight time before “pivoting” to a slower pace of rate hikes starting in December.

Although volume is likely to be on the light side ahead of the Fed’s two-day meeting, demand for higher risk shares is likely to remain strong as investors wager that the Fed will curtail its super-sized rate hikes before the end of the year.

After four straight 75-basis point rate hikes, the Fed is expected to drop back to a 50-basis point rise.

For a look at all of today’s economic events, check out our economic calendar.

Asian Shares Close Mostly Lower Amid Rising Uncertainties in China

The major Asia-Pacific stock markets are trading mostly lower on Wednesday, bucking the trend set by Wall Street overnight. Weighing on the markets is a firm dollar and slight rise in U.S. Treasury yields as the risks of a global recession continued to dampen investor outlook even as corporate earnings in the United States alleviated some growth fears.

Other catalysts behind the selling pressure are nervous investors in China amid the ongoing Party Congress and higher-than-expected UK inflation readings.

Japan’s Nikkei 225 Index settled at 27257.38, up 101.24 or +0.37%. Hong Kong’s Hang Seng Index is trading 16588.25, down 326.33 or -1.93% and South Korea’s KOSPI Index finished at 2237.44, down 12.51 or -0.56%.

In Australia, the S&P/ASX 200 Index settled at 6800.10, up 20.90 or +0.31% and in China, the benchmark Shanghai Index is trading 2237.4, down 12.51 or -0.56%.

China, Hong Kong Shares Fall on Caution During Party Congress

China stocks fell on Wednesday, as investors were cautious amid uncertainties during the Communist Party congress, even as a raft of state-backed and large asset managers announced measures to stabilize the market, Reuters reported.

At least 21 large onshore China asset managers including E Fund Management Co, Invesco Great Wall Fund Management, and Bank of Communications Schroder Fund Management said this week they were investing their own money to buy products in a bid to stabilize the confidence on China’s capital market, local media reported.

Hong Kong’s Chief Executive John Lee Fails to Impress Investors

In his first policy address since he took office in July, Lee said the government would set aside billions to attract businesses to the city, and launch a so-called top talent pass scheme to “entice talents to pursue their careers in Hong Kong,” CNBC reported.

Hong Kong has lost thousands of residents since the pandemic started, worsening a “brain drain” from the international financial hub.

Shares fell after Lee announced the government will set aside 30 billion Hong Kong dollars ($3.8 billion) to attract businesses to the city, and launch a so-called top talent pass scheme to “entice talents to pursue their careers in Hong Kong.”

Australian Shares Post Modest Gain

Australia’s S&P/ASX 200 Index traders shrugged off weaker crude oil prices to close marginally higher for the session. The index was lifted by lithium miner shares and travel stocks such as Quantas. The best performing issue on the benchmark index was Core Lithium, up 8.2 percent.

Shares in former tech darling Megaport plunged 22.1 percent after its sales growth for the September quarter missed analysts’ expectations. The internet connectivity business said total revenue for the quarter was $33.7 million, up 10 percent on the prior quarter.

Investors Remain Nervous

Wednesday’s sessions opened with high expectations following strong gains across the board on Wall Street on Tuesday, but the subsequent buying wasn’t strong enough to sustain the rally.

The divergence from Wall Street suggests sellers are still in control in Asia. A lower trade on Thursday could wipe out all of this week’s previous gains.

For a look at all of today’s economic events, check out our economic calendar.

Asia-Pacific Shares Finish Mixed Ahead of US Earnings Announcements

The major Asia-Pacific stock markets finished mixed as recession fears offset expectations of continued tightening by the major central banks. After last week’s sharp sell-offs, the markets had little to grasp on to early Monday.

The trade also seemed a little tentative ahead of inflation news from several countries in the region throughout the week, Australian employment statistics and China GDP and a loan prime rate decision. U.S. earnings season also starts, which could be the source of volatility throughout the week.

On Monday, Japan’s Nikkei 225 Index settled at 26775.79, down 314.97 or -1.16%. Hong Kong’s Hang Seng Index closed at 16612.90, up 25.21 or -0.15% and South Korea’s KOSPI Index finished at 2219.71, up 7.16 or +0.32%.

In Australia, the S&P/ASX 200 Index settled at 6664.40, down 94.40 or -1.40% and in China, the Shanghai Index finished at 3084.94, up 12.96 or +0.42%.

Japanese Shares Pressured Despite Tourism Boost

Japanese stocks fell on Monday as investors braced for more signals of global recession, although tourism-related shares performed well following the border re-opening last week.

High-growth stocks weighed down the index the most, with online medical services company M3 Inc dropping 5.13% and SoftBank Group Corp losing 1.77%.

Last week, Japan reinstated visa-free travel to dozens of countries, ending some of the world’s strictest border controls to slow the spread of COVID-19. Prime Minister Fumio Kishida is counting on tourism to help invigorate the economy and reap some benefits from the Yen’s slide to decades-low.

China, Hong Kong Shares Recover from Early Session Weakness

Shares in China and Hong Kong settled higher on Monday after feeling pressure earlier in the session after Chinese President Xi Jinping talked up national security in a speech on Sunday, while dashing hopes of any changes in growth-hitting zero-COVID policies and property sector curbs.

President Xi called for accelerating the building of a world-class military, while touting the fight against COVID-19 as he kicked off a Communist Party Congress by focusing on security and reiterating policy priorities.

Investors felt that paying more attention to security would mean lower efficiency that would hurt China’s potential economic growth.

Australia Shares Dragged Down by Slumping Miner, Energy Stocks

Australian shares tumbled on Monday, dragged down by mining and energy stocks on weaker iron ore and oil prices, while persistent fears of a possible worldwide recession weighed on investor sentiment.

Leading losses on the benchmark, mining stocks dropped 2.9%, as iron ore prices fell amid worries over demand in top steel producer China. Mining giants Rio Tinto, BHP Group and Fortescue Metals Group fell between 2.8% and 3.2%.

Gold stocks dropped 3.4% to hit their lowest since September 30. Newcrest Mining and Northern Star Resources fell 2.4% and 3.3%, respectively.

Energy stocks lost 2.7% after oil prices fell more than 3% on weak oil demand. Woodside Energy and Santos dropped 2.5% and 3.1%, respectively.

For a look at all of today’s economic events, check out our economic calendar.

China Shares Finish Higher; Led by Chip Makers, Energy Shares

The major Asia-Pacific stock markets finished mixed on Wednesday. Early in the session, Asian stocks were bogged down at two-year lows as China’s continuing COVID crisis and a surging U.S. Dollar weighed on investors. Later in the session, shares bounced off their lows as stocks in China recovered enough to close higher for the day.

In Japan, the benchmark Nikkei 225 Index settled at 26396.83, down 4.42 or -0.02%. Hong Kong’s Hang Seng Index closed at 16701.03, down 131.33 or -0.78% and South Korea’s KOSPI finished at 2202.47, up 10.4 or +0.47%.

In China, the Shanghai Index settled at 3025.51, up 45.71 or 1.53% and in Australia, the ASX 200 closed at 6647.50, up 2.5 or +0.04%.

Japanese Shares Dip, Tech Stocks Tumble

Japanese stocks hemmed and hawed in a volatile session on Wednesday, with many of the major players moving to the sidelines ahead of this week’s key U.S. Consumer Price Inflation (CPI) report that will be closely analyzed for clues to inflation and the rate hikes that could come to tame it.

According to Reuters, the biggest loser on the Nikkei was semiconductor equipment maker Tokyo Electron Ltd, which fell 4.69% amid ongoing struggles in the chips industry.

Demand was strong for system-on-chip designer Socionext Inc, however, which started trading on Wednesday after what is said to be the biggest IPO in Japan so far this year.

Today’s price action suggests there may be more downside in growth stocks, especially in the semi-conductor-related stocks. Besides fears of a global recession and higher rate hikes from the Fed, Apple’s decision to suspend iPhone production several weeks ago is also being blamed for the current weakness in the sector.

Additionally, the price action also indicates investors are likely to continue selling off high-tech stocks, while buying stocks related to domestic demand.

South Korean Shares Rise on Dovish Central Bank Outlook

South Korean stocks posted a small gain on Wednesday after the country’s central bank raised interest rates and flagged more to come, but also offered clues that policymakers may be considering slowing the pace of tightening.

The Bank of Korea (BOK) raised its benchmark policy rate by 50 basis points to 3.00%, as expected, bringing total rate hikes since August last year to 250 basis points.

China Stocks Rebound on Strong Credit Expansion, Hong Kong Stumbles

China stocks rebounded sharply on Wednesday after data showed the country’s loan growth beat expectations, while Hong Kong’s stock index hovered around 11-year lows amid concerns of China’s zero-COVID policy and overseas inflation and recession woes.

New bank lending in China nearly doubled in September from the previous month and far exceeded expectations after the central bank acted to spur an economy weakened by a property crisis and a resurgence of COVID-19 cases.

Meanwhile, China will persist with its COVID policies to avoid losing control over local coronavirus outbreaks, the official newspaper of the ruling Communist Party warned in commentary for the third straight day.

“Lying flat is not to be advised, and to win (the COVID battle) while lying flat is not possible,” People’s Daily wrote.

For a look at all of today’s economic events, check out our economic calendar.

Asia-Pacific Shares Fall on Global Recession Fears

The major Asia-Pacific share markets fell on Wednesday as swelling borrowing bolstered fears of a global recession, frightening investors into the arms of the safe-haven dollar and driving the Chinese Yuan to record lows. Investors were taking their cues from another rise in U.S. Treasury yields with the benchmark 10-year breaching 4% for the first time since 2010.

Down Across the Board

In Japan, the benchmark Nikkei 225 Index settled at 26173.98, down 397.89 or -1.5%. Hong Kong’s Hang Seng Index is at 17277.98, down 582.67 or -3.26% and South Korea’s KOSPI Index is at 2169.29, down 54.27 or -2.45%.

China’s benchmark Shanghai Index finished at 3045.07, down 48.79 or -1.58% and Australia’s S&P/ASX 200 Index settled at 6462.00, down 34.2 or -0.53%.

Odds of Global Recession Increasing

“It is now clear that central banks in advanced economies will make the current tightening cycle the most aggressive in three decades,” said Jennifer McKeown, head of global economics at Capital Economics. “While this may be necessary to tame inflation, it will come at a significant economic cost.”

“In short, we think the next year will look like a global recession, feel like a global recession, and maybe even quack like one, so that’s what we’re now calling it.”

China Stocks Track Global Peers Lower, Yuan Tumbles to Record Lows

China stocks fell on Wednesday and Hong Kong Shares neared 11-year lows, as fears grew that rapid interest rate hikes would tip the global economy into recession.

Meanwhile, China’s onshore Yuan touched the weakest level against a rising dollar since the global financial crisis of 2008, while its offshore counterpart hit the lowest on record, pressured by expectations of more Federal Reserve rate hikes.

Currency traders said the local currency was reacting to broad greenback strength in global markets as the dollar hit a fresh two-decade peak against a basket of currencies. The dollar has been buoyed by safe-haven demand and a hawkish Fed in recent days.

The declines come even as China’s central bank on Monday announced fresh steps to slow the pace of the Yuan’s recent fall by making it more expensive to bet against the currency.

Short-Term Outlook

It’s very difficult to buy Asia-Pacific stocks right now with global investors on edge as surging borrowing costs stoke fears of widespread recession, with most of the world’s major central banks putting their focus squarely on tightening policies to contain super-heated inflation.

For a look at all of today’s economic events, check out our economic calendar.

Asia-Pacific Markets Tumble after Putin Accuses West of “Nuclear Blackmail”

The major Asia-Pacific stock indexes finished lower on Wednesday with Japan’s Nikkei 225 touching a two-month low ahead of today’s U.S. Federal Reserve policy decisions at 18:00 GMT.

Investors also flocked to the safe-havens such as government bonds, the U.S. Dollar and the Japanese Yen after Russian President Vladimir Putin on Wednesday ordered a partial mobilization and accused the West of “nuclear blackmail”.

On Wednesday, Japan’s Nikkei 225 Index settled at 27313.13, down 375.29 or 1.36%. Hong Kong’s Hang Seng Index finished at 18444.62, down 336.80 or -1.79% and South Korea’s KOSPI Index closed at 2347.21, down 20.64 or -0.87%.

In China, the benchmark Shanghai Index settled at 3117.18, down 5.23 or -0.17% and in Australia, the S&P/ASX 200 Index finished at 6700.20, down 106.20 or -1.56%.

Investors Spooked as Putin Signals Major Escalation of War in Ukraine

Russian President Vladimir Putin rattled the Asia-Pacific markets on Wednesday after he called up 300,000 reservists to fight in Ukraine and said Moscow would respond with the might of all its vast arsenal if the West pursued what he called its “nuclear blackmail” over the conflict there.

It was Russia’s first such mobilization since World War Two and signified a major escalation of the war, now in its seventh month.

In a televised address to the Russian nation, Putin said:  “If territorial integrity of our country is threatened, we will use all available means to protect our people – this is not a bluff”.

Russia had “lots of weapons to reply,” he said.

Sellers hit stock markets in the Asia-Pacific region. The Euro also tumbled, but gold and crude oil rose with the latter jumping 3%.

Clearly, Putin upped the ante in the region by bringing up the ‘Nuclear Card’ and investors will be watching for how the West responds. More sanctions on the way? Oil and commodity shortages? Faster route to a massive global recession? These are factors that investors have to consider as the major central bankers push for more rate hikes.

Asian Development Bank: Asia Shows Signs of Recovery, but China is a Drag

The Asian Development Bank now sees growth of 4.3% in 2022 and 4.9% in 2023 for emerging Asian economies, according to the latest updates in its report.

The Manila-based lender slashed its forecasts for China to 3.3% in 2022 from its previous prediction of 4% revised in July, dragging down the wider region’s growth prospects.

Taiwan and South Korea, in particular, are likely to see a decline in export demand, Asian Development Bank Chief Albert Park told CNBC’s “Squawk Box Asia.”

For a look at all of today’s economic events, check out our economic calendar.

Asia-Pacific Shares Rise as Japan’s Core Inflation Nears 8-Year High

The major Asia-Pacific stock markets posted solid gains on Tuesday as investors responded to news of a jump in Japan inflation and China’s decision to keep its loan prime rate on hold. The markets were also lifted by a rebound in the final hour of trading on Wall Street. Gains were limited, however, as investors looked ahead to the start of the Federal Reserve’s policy meeting on Tuesday.

In Japan, the Nikkei 225 Index settled at 27688.42, up 120.77 or +0.44%. Hong Kong’s Hang Seng Index rose 18781.42, up 215.45 or +1.16% and South Korea’s KOSPI Index finished at 2367.85, up 12.19 or +0.52%.

In Australia, the S&P/ASX 200 Index settled at 6806.40, up 86.5 or 1.29%. China’s Shanghai Index was also higher, closing at 3211.41, up 6.80 or +0.22%.

Japan’s Core Inflation Hits Near 8-Year High, Stays Above BOJ’s Target

The major overnight event comes out of Japan, where a government report showed Japan’s core consumer inflation surged to 2.8% in August, hitting its fastest annual pace in nearly eight years and exceeding the central bank’s 2% target for a fifth straight month as price pressure from raw materials and yen weakness broadened.

The strength of August inflation reinforced growing suspicions among economists that price pressure will last longer than the Bank of Japan (BOJ) has been expecting, though many still expect no immediate change to its ultra-easy policy.

Will the Surge in Core Inflation Prod the BOJ to Shift Policy?

The inflation data highlights the dilemma the BOJ faces as it tries to underpin a weak economy by maintaining ultra-low interest rates, which in turn are fueling an unwelcome slide in the Yen that pushes up import costs.

With inflation still modest compared with price rises seen in other major economies, the BOJ has pledged to keep interest rates ultra-low, remaining an outlier in a global wave of monetary policy tightening.

But traders are wondering how long the BOJ can maintain this ultra-dovish policy. At Thursday’s central bank policy meeting, investors will be focusing on whether BOJ Governor Haruhiko Kuroda will offer stronger warnings on the Yen’s sharp decline or tweak his view the recent cost-push inflation will be short-lived.

“Japan’s consumer inflation is perking up at a faster than expected pace, partly due to the weak Yen. It’s becoming hard for the BOJ to keep saying price rises will remain temporary,” said Mari Iwashita, chief market economist at Daiwa Securities.

Given today’s strong inflation report, the BOJ’s dovish stance will definitely be in the spotlight following the Fed’s interest rate decision on Wednesday.

For a look at all of today’s economic events, check out our economic calendar.

Asia-Pacific Shares Plummet as Investors Brace for More Aggressive Fed

The major Asia-Pacific stock indexes are down sharply across the board on Wednesday, following Wall Street’s bearish lead, after a higher-than-expected U.S. consumer price index report for August.

At 04:02 GMT, Japan’s Nikkei 225 is trading 27955.18, down 659.45 or -2.30%. The Hang Seng Index in Hong Kong is off by 2.59%, while mainland China’s Shanghai Composite is down 1.02%. In Australia, the S&P/ASX 200 fell 2.47%.

On Wall Street on Tuesday, the blue chip Dow Jones Industrial Average lost 1276.37, or 3.94%, to close at 31104.97. The benchmark S&P 500 Index declined 4.32% to 3932.69, and the NASDAQ Composite lost 5.16% to end the day at 11633.57. All the major averages reacted to a jump in the U.S. 2-year Treasury yield, which reached 3.79%, the highest level since 2007.

Asia-Pacific Investors Shed Risky Stocks as US Inflation Remains Stubbornly High

U.S. consumer prices unexpectedly rose in August and underlying inflation accelerated amid rising costs for rents and healthcare, giving the Federal Reserve ammunition to deliver a third 75 basis points interest rate hike next Wednesday.

The surprisingly firm inflation readings reported by the Labor Department on Tuesday were despite an easing in global supply chains, which had contributed to a surge in prices earlier in the year. With a resilient labor market supporting strong wage growth, inflation has probably not peaked, keeping the Fed on an aggressive monetary policy path for a while.

Some traders are now expecting a full point rate hike from the U.S. Federal Reserve at its September meeting, according to the CME FedWatch tracker of Fed funds futures bets.

The probability of a 100-basis-point rate hike rose to 33% from 0%, and the chance for a three-quarter point hike fell to 67% from 91% a day earlier.

Economists at Nomura now also expect to see a full percentage hike.

Short-Term Outlook

The size of Tuesday’s retreat on Wall Street and in the Asia-Pacific region make the indexes vulnerable to a technical bounce, but that won’t change the fundamentals.

Investors in both areas were hoping that resilient growth and slowing inflation would create a better risk taking environment, but those conditions existed before the release of the U.S. CPI data at 12:30 GMT on Tuesday.

The environment changed at that time and now the global investing community believes the U.S. economy is still too hot. With no clear signs of a slowdown in the U.S. labor market and inflation still a major problem, all bets are off on the Fed declaring a downshift on its quest to raise rates aggressively to drive inflation lower.

Asia-Pacific shares as well as U.S. shares are likely to trade lower until investors can price in a possible full-percentage point rate hike at next week’s Federal Open Market Committee meeting.

Furthermore, investors are also going to take a serious look at the possibility of a U.S. and global recession since the Fed is going to have to keep raising rates until inflation takes a major downturn. The Fed runs the risk of killing economic growth in its quest to push inflation lower.

For a look at all of today’s economic events, check out our economic calendar.

Aussie Shares Jump as Fears Over Aggressive Policy Tightening Ease

The major Asia-Pacific stock markets closed higher on Friday as investors reacted to a plunge in U.S. Treasury yields the previous session and a drop in the U.S. Dollar. Rising risk sentiment on Wall Street also drove investors back into higher-risk equities. At the same time, investors were digesting Federal Reserve Chair Jerome Powell’s latest comments as he vowed to raise rates to tackle inflation “until the job is done.”

China’s Consumer Inflation Moderates

China’s consumer inflation came in at 2.5% in August, lower than the 2.7% recorded in July. According to HSBC, China’s latest inflation figures give the People’s Bank of China (PBOC) room to maintain its current monetary stance.

“The moderation in price pressures give the PBOC room to stay accommodative,” greater China economist Erin Xin said.

Additionally, given China’s weak growth outlook and the accommodative PBOC monetary policy stance versus the aggressive tightening by the U.S. Federal Reserve, the Dollar/Yuan is expected to be well supported.

China Stocks Rise on Modest CPI Data, Stimulus Hopes

China stocks on Friday saw their biggest gain in a month, as modest inflation data and policy support hopes helped investors look past tightened COVID-19 measures.

China’s Shanghai Index settled at 3262.05, up 26.47 or +0.82%.

China-listed real estate developers surged 4.5%, while mainland developers traded in Hong Kong jumped 5.9%. Financial shares gained more than 2%, and healthcare firms rose 1.6%.

Japan’s Nikkei Ends Week on High in Hawkish Climate

Japanese stocks gained on Friday, building on a rally from the previous day, even as investors digested hawkish remarks from policymakers that firmly established views of aggressive rate hikes to tame inflation.

Japan’s Nikkei 225 Index settled at 28214.75, up 149.47 or +0.53%.

Every sector on the Nikkei rose overall. Healthcare was one of the best performing sectors, tracking a strong showing on Wall Street overnight.

Investors in Japan and on Wall Street shrugged off hawkish comments from Federal Reserve Chair Jerome Powell, who said on Thursday the U.S. central bank was “strongly committed” to controlling inflation. Japanese investors also downplayed the supersized rate hike by the European Central Bank (ECB) and its commitment to raise rates aggressively to fight inflation.

Miners Push Australian Shares to Close at One-Week High

Australian shares on Friday closed at their highest level in more than a week, as higher commodity prices lifted miners, and as fears about aggressive policy tightening eased.

Australia’s S&P/ASX 200 Index settled at 6894.20, up 45.5 or +0.66%. The benchmark index also posted its first weekly gain in three. The mining sub-index led the gains, climbing 3.6%, as iron ore prices rose to two-week highs.

The catalyst behind the overall rally was the prospect of lower interest rates. On Thursday, the Reserve Bank of Australia (RBA) signaled it was open to slowing the pace of rate hikes in the near-term. But uncertainty remained about how much further rates might have to rise to bring demand back into line with supply.

For a look at all of today’s economic events, check out our economic calendar.

Asia-Pacific Shares Mixed; Jump in Oil Prices Drive Energy Shares Higher in Japan

The major Asia-Pacific stock markets traded mixed on Monday as investors reacted to an escalation in the European energy crisis, a jump in crude oil prices and a sharply higher U.S. Dollar. The best performing indexes were China’s Shanghai Index and Australia’s S&P/ASX 200 Index. Hong Kong’s Hang Seng Index is down over 1%.

China Shares Pressured by COVID Curbs, Yuan Weakness

China’s blue-chip stocks dropped on Monday, led by consumer staples amidtightening COVID-19 restrictions in some big cities, while foreign investors liquidated shares as the Yuan plummeted to a more than two-year low.

At 07:29 GMT, the benchmark Shanghai Index is at 3199.91, up 13.43 or +0.42%.

China’s southern tech hub of Shenzhen said it will adopt tiered anti-virus restriction measures starting on Monday, while the southwestern metropolis of Chengdu announced an extension of lockdown curbs.

China’s Yuan touched a new more than two-year low against the U.S. Dollar, pressured by broad greenback strength in the global market and the newly implemented COVID curbs. This move prompted foreign investors to sell more than 6.5 billion Yuan ($940 million) of Chinese shares so far through the stock connect scheme.

In economic news, a strong rebound in China’s services sector eased slightly in August amid fresh COVID-19 flare-ups but business confidence rose to a nine-month high, a private survey showed.

In sector related news, consumer staples lost 2.1%, but the energy crisis in Europe lifted Chinese energy shares 4.7%, with coal miners surging 5%.

Technology stocks listed in Hong Kong were weaker, led by Meituan, Tencent and Alibaba down between 2% and 3.1%.

Japanese Stocks Dragged Down by Wall Street Weakness

Japan’s Nikkei share average fell for a fourth straight session on Monday, tracking Wall Street’s weak performance last week, amid the absence of market-moving cues due to a U.S. banking holiday.

Japan’s Nikkei 225 Index settled at 27619.61, down 31.23 or -0.11%. The volume of shares traded on the Tokyo Stock Exchange’s main board was 0.85 billion, compared to the average of 1.13 billion in the past 30 days.

Energy shares rose, with refiners and explorers gaining 1.06% and 0.83%, respectively after oil prices surged over $2.00 per barrel.

Higher Commodity Prices Boost Australian Shares as Investors Awaited the Next RBA Rate Hike

Australian shares closed higher on Monday as the resource-heavy bourse was buoyed by stronger oil and metal prices, while investors also awaited the central bank’s rate decision amid growing inflationary pressures.

The S&P/ASX 200 Index closed at 6852.20, up 23.50 or +0.34%.

In sector and stock-related news, miners jumped 2.1% and were the top gainers on the domestic bourse after iron ore futures rebounded. Heavyweights BHP Group and Rio Tinto gained 3.2% and 1.8%, respectively.

For a look at all of today’s economic events, check out our economic calendar.

Where Are Investors Putting Their Money -Now Vs. Then?

A way to determine this is to simply plot the indices and then see how they stack up against each other. Price data should also be viewed and analyzed in a multi-timeframe environment: short-term, medium-term, and long-term.

As a trader or investor, we know it’s important to determine if a market is in a bull, bear, accumulation, or distribution phase. Additionally, we want to know how the market we’re trading is performing compared to its peers.

The following charts provide snapshots of how the SPY ETF (US S&P 500) is doing compared to the other US and global stock indices.

The year-to-date chart is showing us a maximum volatility spread of 15.73%. This is simply the difference between the highest stock index, Australia 200 +1.18% vs the lowest stock index US Nasdaq 100 -14.55%. Australia’s market has recently done well due to its strong energy and commodity interests which in turn has contributed to the strengthening Australian dollar.

SPY Year-to-date Daily: Max Volatility 15.73%

max volatility

TheTechnicalTraders – TradingView

The volatility spread at first doesn’t seem that significant but over time it can be substantial. This is one of the reasons why our team continually tracks global money flow according to each country’s stock index but additionally other types of markets and asset classes. Our quantitative trading research is crucial in determining which markets to trade and how to efficiently employ trading capital.

This maximum volatility spread during 2021-2022 is 44.42%. The highest stock index, India 50 +23.75% vs the lowest stock index Hong Kong 33 -20.67%. The Hong Kong and China stock markets have been plagued with numerous Covid issues in 2020, 2021, and now recently again in 2022.

SPY 2021-2022 Daily: Max Volatility 44.42%

max volatility

TheTechnicalTraders – TradingView

Now we can take a longer-term view of the past 2+ years covering Covid before and after. We notice that the Nasdaq 100 is the overall leader despite its recent negative performance in 2022.

This maximum volatility for 2020-2022 is 89.70%. The highest stock index, US Nasdaq 100 +69.70% vs the lowest stock index Hong Kong 33 -20.00%.

SPY 2020-2022 Daily: Max Volatility 89.70%

max volatility

TheTechnicalTraders.com – TradingView

Knowledge, Wisdom, and Application Are Needed

It is important to understand that we are not saying the market has topped and is headed lower. This article is to shed light on some interesting analyses of which you should be aware. As technical traders, we follow price only, and when a new trend has been confirmed, we will change our positions accordingly.

We provide our ETF trades to our subscribers, and in the last six trades we entered in March, all have now been closed at a profit! Our models continually track price action in a multitude of markets, asset classes, and global money flow. As our models generate new information about trends or a change in trends, we will communicate these signals expeditiously to our subscribers and to those on our trading newsletter email list.

Successful trading is not limited to when to buy or sell stocks or commodities. Money and risk management play a critical role in becoming a consistently profitable trader. Correct position sizing utilizing stop-loss orders helps preserve your investment capital and allows traders to manage their portfolios according to their desired risk parameters. Additionally, scaling out of positions by taking profits and moving stop-loss orders to breakeven can complement ones’ success.

What Strategies Can Help You Navigate the Current Market Trends?

Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market and other asset classes across the globe. We believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.

Historically, bonds have served as one of these safe-havens, but that is not proving to be the case this time around. So if bonds are off the table, what bond alternatives are there and how can they be deployed in a bond replacement strategy?

We invite you to join our group of active traders and investors to learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

Markets Cautious Ahead Of Russia-Ukraine Tensions And Fed Meeting

Global equity markets were flung on a chaotic rollercoaster ride as investors grappled with Fed hike fears and mounting geopolitical tensions over Ukraine. In the currency space, king dollar edged higher despite the slight retreat in Treasury yields while gold glittered amid the risk aversion.

European markets are catching up on the strong US close this morning, but the caution in Asia has cast a cloud over sentiment as investors would prefer to shrug off the intense volatility that rattled global markets on Monday.

Although Wall Street swung back toward positive territory yesterday as investors exploited the selloff to snatch discounted shares, US equity bulls are certainly not out of the woods. Should inflation concerns, Fed hike fears, and geopolitical tensions fuel risk aversion in the days ahead, this could spell trouble for risk assets across the globe.

Overnight, Australia’s inflation jumped to 3.5% in the fourth quarter of 2021 amid rising petrol and housing costs.  The Australian dollar pushed higher during early trading as expectations rose over the RBA adopting a more hawkish tone at its next monetary policy meeting on February 1. Traders are currently pricing in a 58% chance of a rate hike by May 2022, with June fully discounted.

Spotlight swings on Fed meeting

Although monetary policy is widely expected to remain unchanged, the FOMC meeting could provide some key insight into how aggressive the Fed intends to tighten policy throughout 2022. Markets expect the central bank to signal on Wednesday that it plans to hike interest rates in March, with a total of four 25 basis point interest rates increases expected by the end of this year. While the Fed may stick to the script, any hesitancy on future rate increases or a more dovish tone could breathe life back into riskier assets. Alternatively, a hawkish Fed may deal another blow to stock markets, injecting equities bears with fresh confidence.

Commodity spotlight – Gold

Gold kicked off the week on a firm note as geopolitical tensions accelerated the flight to safety.

The slight retreat in Treasury yields also helped zero-yielding gold, as prices ventured towards the $1845 resistance level. There is no doubt that this will be a big week for gold with its near-term outlook likely to be influenced by the Fed meeting.

A hawkish Fed that signals multiple rate hikes could dampen the appetite for gold, resulting in prices sinking back towards $1831 and $1810. If the Fed surprises markets by deviating from the script and shows hesitancy in future rate hikes, this may push the precious metal higher towards $1870.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Block Inc. to Become First Crypto-Related Listing on Australia’s ASX

The news hit the wires late last year of Australia’s Afterpay (APT) getting shareholder approval for Block Inc.’s planned $29bn buyout. Block Inc., previously known as Square Inc., is a mobile payment and merchant services platform.

Afterpay, Block, and the Acquisition

Afterpay is a buy no pay later firm, allowing customers to pay for both goods and services in installments. The company was founded in 2014 and has more than 16 million users.

Afterpay operates in Australia and New Zealand, North America, and the UK. The company floated on the Australian Securities Exchange (ASX) on 4th May 2016, with an offer price of $1.00. As of Friday, 14th January, Afterpay closed at A$69.03.

Twitter Inc. co-founder Jack Dorsey co-founded Block Inc. The former Twitter CEO had stepped down to focus on Block that was re-branded shortly after his stepping down as Twitter CEO.

Earlier this week, Reuters reported that the Bank of Spain had approved the $29bn buyout of Afterpay Ltd.

According to Reuters, this would be Block’s biggest deal to date and the largest sum paid for an Australian firm. Other ASX deals are still pending that will be larger, however, including a BHP-Woodside $31bn megadeal.

The merged company will list on the ASX on 20th January. The merger is expected to support Afterpay’s growth in the U.S market, where it competes with platforms such as PayPal and Apple.

According to news that hit the wires this morning, the ASX was putting a framework together for other blockchain-backed companies to float this year.

The exchange is also moving to blockchain, with the ASX CHESS (Clearing House Electronic Subregister System) replacement project implementing a blockchain-based clearing and settlement system. The estimated transition date from CHESS to blockchain is early 2023.

Other listed crypto-related firms include:

  • Coinbase Global Inc. (COIN), traded on the NASDAQ.
  • Bit Mining Ltd (BTCM), traded on the New York Stock Exchange.
  • HIVE Blockchain Technologies Ltd (HIVE), traded on the NASDAQ.
  • Bitfarms Ltd (BITF), traded on the NASDAQ.

Crypto-Linked Companies Go Mainstream

It’s been a busy start to the year for the crypto markets. While regulatory chatter has seen a marked increase, there’s also been plenty of activity within the crypto corporate space.

It’s not just crypto-related firms that are listing on exchanges that are getting air time. Just this morning, news hit the wires of crypto exchanges planning to offer stocks to compete with mainstream platforms such as Robinhood. U.S crypto trading platforms FTX and Bitstamp are reportedly planning to offer stock trading.

2021: A Year Defined by Soaring Inflation, Covid Variants & Market Resilience

After an extremely chaotic 2020, the world pinned hopes on stability and normality returning this year.

Indeed, 2021 kicked off on a positive note as the mass vaccinations against Covid-19 and confirmation of Joe Biden’s victory in the presidential election boosted investor confidence.

Renewed stimulus hopes from Biden’s $1.9 trillion economic rescue plan fuelled the risk-on mood, propelling US stocks to record highs during the first month of 2021. Console retailer GameStop also hijacked the headlines by surging over 1600% in January as a group of investors on Reddit fuelled a short squeeze in the company’s shares.

In February, a sense of caution enveloped global markets as investors mulled over the possibility of rising inflation becoming a major theme. Signs of inflation were already spotted across the globe amid supply-chain disruptions, while prices pressures were expected to return amid an economic boom powered by vaccines and pent-up consumer demand. Taking a look at commodities, gold tumbled to an 8-month low under $1720 thanks to rising yields, dollar strength, and growing global risk appetite.

Things started getting sticky in March as coronavirus variants appeared across the globe. In the United Kingdom, the B.1.1.7 strain was initially considered more lethal than earlier variants. Different variants of the novel coronavirus were also reported in Brazil and even India which saw a spike in cases despite vaccine rollouts. On the currency front, the dollar appreciated against almost every single G10 currency as investors speculated that the massive fiscal stimulus and aggressive vaccinations would help the US economy recover.

Q2 kicked off on a positive note despite global economic uncertainty caused by the ongoing pandemic. Equity bulls remained in the driving seat amid robust Q1 earnings, the Fed’s pledge to keep rates lower for longer, and China’s eye-popping 18.3% growth in the first quarter.

In other news, Coinbase made its debut on Nasdaq on April 14th which was seen as a watershed moment for the cryptocurrency industry.

Everyone was talking about copper in May as the commodity surged to a record high of $4.9. The rally was triggered by the reopening of major economies and the robust demand for minerals needed for the green energy agenda. Given how copper is used in everything from electric vehicles to home appliances like washing machines, the outlook was heavily bullish – especially amid the bigger global focus on green energy. The commodities boom, fuelled by rising global demand and supply shortages fuelled fears around inflation across the globe.

In the United Kingdom, the Delta variant of Covid-19 clouded economic recovery hopes in June. As the third wave of Covid-19 cast doubt on more lockdown easing before July, the British Pound tumbled against every single G10 currency, sinking as low as 1.3790 against the dollar.

It was not only the UK affected by the Delta variant, it swept across Europe and started gaining ground in the United States. Hotspots were also found in Asia and Africa.

A sense of unease gripped markets in July as Covid-19 cases across the globe surged. The International Monetary Fund (IMF) warned that unequal access to Covid vaccines risked derailing the global recovery. Global stocks displayed resilience despite the Delta variant fuelling the surge in coronavirus cases worldwide. Infact, the S&P500 concluded the month of July almost 2% higher despite the growing uncertainty. Down under, the Australian dollar collapsed like a house of cards due to a surge in virus infections and lockdown restrictions in Australia.

Hong Kong stocks stole the spotlight in August as the tech-heavy Hang-Seng Index briefly tumbled into bear market territory, dropping more than 20% from its mid-February peak. The descent was driven by China’s regulatory crackdown on sectors ranging from financial technology to education and gaming.

Risk-off was the name of the game during the final month of Q3 thanks to inflation fears, growth concerns, and mounting uncertainty over Covid-19. As inflation made itself at home in the United States, Federal Reserve policymakers were forced to accept that inflation proved to be larger and more long-lasting than expected. The terrible combination of growth doubts, turmoil surrounding China’s Evergrande and Fed taper fears saw the S&P500 fall 4.8% in September.

Oil prices exploded higher in October, with WTI rising beyond $80 for the first time since 2014 as surging natural gas prices spurred greater demand for crude ahead of winter.

Tight global supply and robust fuel demand in the United States and beyond energized oil bulls. WTI concluded the first month of Q4 roughly 10% higher while Brent was not too far behind gaining 6%. Interestingly, the IMF and World Bank both issued warnings over rising inflation.

After “talking about talking about” tapering for many months, the Federal Reserve finally made a move in November.

This marked a crucial turning point as it stepped away from its emergency policy. In a process known as tapering, the Fed was set to reduce $120 billion in monthly purchases of Treasuries and mortgage-backed securities. The mighty dollar appreciated across the board, boosted by increased expectations for a reduction in the Fed’s asset purchase and interest rate hike, possibly in late 2022. During this month, the World Health Organization (WHO) also declared a new coronavirus variant to be “of concern” and named it Omicron. It was first reported to the WHO from South Africa on 24 November.

Growing uncertainty over the Omicron variant weighed heavily on market sentiment in December. With the new variant in town spreading faster than the more prevalent Delta, this clouded the global growth outlook as countries across the globe announced tighter restrictions.

The end of 2021 saw major central banks turning hawkish in the face of rising inflation.

As one of the largest central banks in the world embarked on the path to policy normalization, other banks wasted no time to tighten. We saw the Reserve Bank of New Zealand (RBNZ) raise interest rates in November, the Fed doubling down on its stimulus taper in December, and the Bank of England (BoE) also surprising markets by hiking rates. Indeed, with US inflation skyrocketing 6.8% in the year through November and consumer prices soaring across the globe, this offers a taster of what to expect in 2022.

One key thing to keep in mind is that the S&P500 closed at record highs 69 times this year despite the global growth fears and covid related uncertainty.

US equity bulls were certainly in the driving seat throughout 2021 with the S&P500 up over 27% year-to-date, marking its third straight annual increase.

There is no doubt that 2021 was a historic year defined by runaway inflation, coronavirus variants, and resilient stock markets.

With persistent inflation likely to remain a major theme in 2022, it will be interesting to see whether this forces more central banks to tighten monetary policy. Let’s not forget about the current Omicron menace and risks of new variants potentially clouding the global economic outlook. Equity bulls dominated the scene this year but will we see the same in 2022? Or will the combination of rising inflation and tighter monetary policy end the bull run?

We saw some extreme events throughout 2021 with the show set to continue in 2022. It may be wise to fasten your seatbelts in preparation for another eventful and potentially volatile year for financial markets as 2021 slowly comes to an end.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Caution Prevails as Investors Eye Omicron and Fed Meeting

The dollar held its ground despite US Treasury yields slipping in the previous session, while gold prices remained range bound, waiting for a fresh directional catalyst.

European equity futures are mixed this morning with investors clearly on edge ahead of a week dominated by central bank decisions and key economic reports. Any decisions made on monetary policies will set the tone for the rest of 2021 while heavily impacting risk markets.

With the Bank of England, Bank of Japan, European Central Bank, and Swiss National Bank all expected to keep monetary policy unchanged, all eyes will be on the FOMC meeting on Wednesday. Expectations remain elevated over the Fed announcing a faster pace of tapering in the face of rising inflation and using more hawkish language than has been seen in previous statements. If this does become reality, it could weigh on stock markets while boosting the dollar.

Investors eye Fed decision

The Federal Reserve’s December policy meeting remains the main event for markets this week. With US inflation surging to its highest level in nearly 40 years, equity markets still volatile and the Omicron variant fueling economic uncertainty, it will be interesting to see what policymakers at the Fed have to say.

Back in November, the FOMC made an official announcement on tapering. Fast-forward to today and the central bank is set to announce an acceleration of tapering from January 2022, with consensus expecting the pace to double in speed, in order to counter inflation. This has boosted expectations over the Fed hiking interest rates sooner than expected with traders currently pricing in a 73% probability of at least one rate hike by early May 2022 and fully pricing a 25-basis point hike by mid-June 2022.

Much attention will be directed towards the Fed’s new dot plot and updated economic forecasts. Back in September, policymakers were forecasting one rate hike in 2022, followed by three in 2023 and another three in 2024. The new dot plot is expected to show the majority of Fed members now expect two rate hikes in 2022.

Currency spotlight – AUDUSD

The Australian dollar stumbled into Tuesday’s session under pressure as virus cases surged in the country’s most populous state. Daily Covid-19 infections jumped to their highest level in more than two months, fueling concerns over the economic outlook. However, there was some good news as reports showed that business confidence remained well above its long-term average, despite dropping sharply to 12 in November from a downwardly revised 20 in October.

Taking a look at the technical picture, the AUDUSD remains under pressure on the daily charts. Sustained weakness below 0.7180 could encourage a decline towards 0.7080 and 0.7000, respectively.

Commodity spotlight – Gold

Gold could enter the holiday season with a bang due to key central bank meetings, economic data and developments revolving around the Omicron variant. Prices have been trapped within a range over the past few weeks with bulls and bears waiting for a fresh directional catalyst.

This may come in the form of the Federal Reserve meeting or other economic events that could impact risk sentiment. Should the Fed step up the gear on tapering, this is likely to punish gold prices as the dollar appreciates, yields rise and rate hike expectations jump. In the meantime, support can be found at $1765 and resistance around the psychological $1800 level.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

ASX200 – U.S Inflation and Weekend Omicron News to Set the Tone

Economic Calendar 

Tuesday, 14th December

NAB Business Confidence (Nov)

Wednesday, 15th December

Westpac Consumer Sentiment (Dec)

Thursday, 16th December

Employment Change (Nov)

Full Employment Change (Nov)

Unemployment Rate (Nov)

The ASX200

It was a bearish end to the week, with the ASX200 falling for a 2nd consecutive day on Friday. Following a 0.28% decline on Thursday, the ASX200 fell by 0.43% to end the day at 7,354.

There were no major stats from the Australian session to provide direction through the day. The lack of stats left the markets to look ahead to U.S inflation figures due out late in the day.

With the U.S inflation figures considered key to next week’s FOMC projections, the Big-4 and commodity stocks had a mixed session.

The Stats

There were no major stats from Australia to provide direction.

The Market Movers

It was a mixed day for the banks. Westpac fell by 0.81%, with ANZ down by 0.51%. CBA (-0.27%) and NAB (-0.21%) also saw red. Macquarie Group bucked the trend, however, rising by 0.02%.

Commodity stocks also had a mixed session. Newcrest Mining slid by 1.74%, with Fortescue Metals Group Ltd and BHP Group seeing losses of 0.82% and 0.60% respectively. Rio Tinto avoided the red, however, rising by 0.03%

Other Asian Markets

Elsewhere, it was also a bearish session. The Nikkei225 and the Hang Seng Index fell by 1.07% and by 1.00% respectively, with the CSI300 ending the day down by 0.46%.

The Day Ahead

It’s another particularly quiet day ahead on the Aussie economic calendar. There are no material stats from Australia to provide direction through the session.

The lack of stats will leave the markets to respond to the U.S inflation figures from Friday and Omicron news updates.

Friday’s gains across the U.S markets should deliver early support, with the rate of acceleration of U.S core inflation having eased in November.

The Futures

In the futures markets, at the time of writing, the ASX200 was up by 13 points.

For a look at all of today’s economic events, check out our economic calendar.

ASX200: Weekly Wrap – 10/12/2021

Economic Calendar

Tuesday, 14th December

NAB Business Confidence (Nov)

Wednesday, 15th December

Westpac Consumer Sentiment (Dec)

Thursday, 16th December

Employment Change (Nov)

Full Employment Change (Nov)

Unemployment Rate (Nov)

The ASX200

It was a bullish week for the ASX200, which rose by 1.55% in the week ending 10th December to end the week at 7,354. In the previous week, the ASX200 had fallen by 0.52%.

With economic data from Australia limited to house price figures, the RBA and market sentiment towards the Omicron strain were key in the week.

While news updates suggested that vaccine efficacies may be materially lower, there was also early evidence that the new strain was a milder one. Also delivering support were early suggestions that a 3rd vaccine would be sufficient to increase protection against any severe illness.

The news in the week coincided with the RBA’s view that the new strain would not derail the economic recovery. On Tuesday, the RBA left policy unchanged, which was in line with expectations.

Throughout the week, however, market sentiment towards U.S inflation and FED monetary policy pegged the ASX200 back.

The Stats

Economic data was limited to house price figures. In the 3rd quarter, the House Price Index rose by 5.0% quarter-on-quarter. The index had risen by 6.7% in the previous quarter.

From Elsewhere

Trade and inflation figures for China were in focus.

China’s USD trade surplus narrowed from $84.54bn to $71.72bn in November. Exports rose by 22%, year-on-year, while imports were up 31.7%. Imports had been up by 20.6% in October, while exports had been up by 27.1%.

While exports were down, strong demand driving imports was a positive for the markets.

In November, China’s annual rate of inflation accelerated from 1.5% to 2.3%. Economists had forecast an annual rate of inflation of 2.5%. Month-on-month, consumer prices increased by 0.4% versus a forecasted 0.3% rise. In October, consumer prices had risen by 0.7%.

Significantly, however, was softer wholesale inflation. In November, the annual wholesale rate of inflation eased from 13.5% to 12.9. Economists had forecast an annual wholesale rate of inflation of 12.4%.

The Market Movers

It was a bullish week for the banks. NAB led the way, rallying by 2.40%, with ANZ and Commonwealth Bank of Australia rising 1.63% and 1.34% respectively. Macquarie Group (+1.13%) and Westpac (+0.72%) ended the week with relatively modest gains, however.

Commodity stocks had a mixed session. Fortescue Metals Group Ltd rallied by 5.85% to lead the way, with Newcrest Mining (+1.76%) and Rio Tinto (+0.32%) also finding support. BHP Group ended the week down by 0.67%, however.

Other Asian Markets

Elsewhere, it was also a bullish week. The Hang Seng Index and the Nikkei225 rose by 0.96% and by 1.46% respectively, with the CSI300 rallying by 3.14%.

The Week Ahead

It’s a busier week ahead on the Asian economic calendar. From Australia, stats include business and consumer confidence figures in the 1st half of the week. On Thursday, employment figures will be key, however.

From China, industrial production and retail sales figures will also draw interest mid-week.

The FED’s monetary policy decision overnight on Wednesday, along with the economic projections will be the main event of the week, however. Following FED Chair Powell’s shift in stance on inflation, will there be a shift in outlook on interest rates?

Away from the economic calendar, expect Omicron news updates to continue to influence.

For now, the key downside risk remains news of Omicron resilience to existing vaccines…

ASX200 – A Quiet Economic Calendar Leaves COVID-19 in Focus as the Markets Look ahead to the FED

The ASX200

It was back into the red, with the ASX200 seeing a 4-day winning streak come to an end on Thursday. Partially reversing a 1.25% rally from Wednesday, the ASX200 fell by 0.28% to end the day at 7,385.

Uncertainty over the new Omicron strain and mixed reports, which had weighed on the European majors on Wednesday, pegged back the ASX200.

Optimism that the strain was less virulent had fueled Wednesday’s breakout. Reports from South Africa of the Pfizer vaccine being as much as 40 times less effective weighed, however. With more time needed to ascertain exactly how effective the existing vaccines are and whether a booster or 3rd dose would be sufficient, uncertainty will likely continue to hang over the global financial markets.

The Stats

There were no major stats from Australia to provide direction.

From China, inflation accelerated further in November. There was some comfort, with wholesale pressures easing, albeit modestly.

In November, China’s annual rate of inflation accelerated from 1.5% to 2.3%. Economists had forecast an annual rate of inflation of 2.5%. Month-on-month, consumer prices increased by 0.4% versus a forecasted 0.3% rise. In October, consumer prices had risen by 0.7%.

Significantly, however, was softer wholesale inflation. In November, the annual wholesale rate of inflation eased from 13.5% to 12.9. Economists had forecast an annual wholesale rate of inflation of 12.4%.

The Market Movers

It was a mixed day for the banks. CBA and NAB both ended the day up by 0.21% respectively. Macquarie Group fell by 0.53%, however, with ANZ (-0.18%) and Westpac (-0.24%) also seeing red.

Commodity stocks also had a mixed session. Fortescue Metals Group Ltd rallied by 1.50% to lead the way, with Newcrest Mining ending the day up by 0.26%. Rio Tinto and BHP Group saw red, however, falling by 0.94% and by 1.20% respectively.

Other Asian Markets

Elsewhere, it was a mixed session. The CSI300 and the Hang Seng Index rallied by 1.66% and by 1.08% respectively, while the Nikkei 225 joined the ASX200 in the red, with a 0.47% loss.

The Day Ahead

It’s another particularly quiet day ahead on the Aussie economic calendar. There are no material stats from Australia to provide direction through the session.

The lack of stats will leave the majors in the hands of the U.S markets and COVID-19 news updates. With the FOMC meeting just days away and U.S inflation figures due out in today’s U.S session, it could prove to be a testy day…

The Futures

In the futures markets, at the time of writing, the ASX200 was down by 10 points.

For a look at all of today’s economic events, check out our economic calendar.