Tom Westbrook and Pete Schroeder
Reuters Singapore/Washington News-Asian stocks fell on Thursday, but the decline was not as much as Wall Street’s overnight plunge. At the same time, oil prices rebounded from lows and US futures jumped as the better economic outlook in Asia offsets investors’ new COVID-1
MSCI’s broadest index in the Asia-Pacific region outside of Japan fell 1%. Japan’s Nikkei Index fell 0.8%, while Hong Kong, Sydney, Shanghai and Seoul all fell less than 1.5%.
This is heavy, but well below the 3.5% drop in the S&P 500 () or the German DAX (4.2%) drop, which caused European stocks to fall to their lowest level since the end of May.
S&P 500 Futures () and
Rob Carnell, chief economist for Asia at ING Bank of the Netherlands, said: “Asia did not really play a role in the second or third wave of transactions because its COVID has been basically under control.”
“As a result, the domestic economy looks reasonable. Exports will remain weak…but domestically, they are still performing well and performing better compared to (Europe and the US).”
Oil prices rose from a four-month low overnight, and the risk-sensitive Australian and New Zealand dollars rose by about a quarter.
Nevertheless, as concerns about new lock-in measures seem to surprise investors, both currencies will now fall against the US dollar every week, and the euro will also fall.
In France, in addition to buying necessities, seeking medical treatment or exercise, people must stay at home starting Friday. Germany will close bars, restaurants and theaters from November 2 to 30.
Rodrigo Catril, a foreign exchange strategist at National Australia Bank, said in a report: “The market has been traveling until yesterday, hoping that improving health care services in response to the pandemic can prevent serious lockdowns.”
“At least in Europe, this dynamic has changed… The question now is whether the US states will follow suit.”
Central bank meetings and economic data were the main focus late on Thursday, and increased uncertainty about the US election on November 3 also put investors in a difficult position.
The Bank of Japan will maintain its massive stimulus plan and has vowed to take further action if the economic impact of the virus threatens deflation.
Investors expect that the European Central Bank will postpone the new measures and hint that it will take action in December, which may put pressure on the euro.
The euro hit a 10-day low for the U.S. dollar and a 100-day low for the Japanese yen overnight, and then rebounded slightly. The final purchase price was $1.1751.
German unemployment and inflation data, European confidence surveys, and advance figures for US GDP will also be closely watched-US data may show record growth but still keep the economy behind 2020.
Michael McCarthy, a strategist at CMC Markets in Sydney, said: “Given the current weakness, any disappointment in these numbers will have a magnifying effect on the market.”
Investors are also increasingly worried that the controversial US election result may trigger a wave of risky asset selling.
Wall Street’s “fear index” Cboe volatility index surged to its highest level since June on Wednesday, and the implied rise in currency volatility indicates that expectations will be mad.
One week implied volatility of RMB
However, the US bond market is sober, and investors look back at voting day and believe that no matter who wins, the government will borrow heavily on coronavirus relief expenditures.
The benchmark U.S. 10-year Treasury bond yield rose overnight, rising by about one basis point to 0.7894% on Thursday.
Seema Shah, chief strategist at Principal Global Investors, said: “Looking forward, the pre-election and potentially greater volatility will eventually subside.”
“The market will soon reiterate a trajectory determined by fundamentals rather than election news flow.”