By Tom Westbrook and Pete Schroeder
Singapore / Washington (Reuters) – Asian stock markets fell on Thursday, but not as sharply as the overnight Wall Street adventure, as oil rose from US lows and futures as its brighter economic prospects plummeted. Asia offset investor concerns about a new COVID-19 lock in Europe.
The broader MSCI Asia-Pacific Index fell outside Japan by 1%. The Japanese Nikkei () fell 0.8% and the falls in Hong Kong (), Sydney (), Shanghai () and Seoul () were less than 1.5%.
This is heavy but much smaller than the 3.5% drop in the S&P 500 (or the 4.2% drop from Germany’s DAX), which pushed European stocks to their lowest level since late May.
S&P 500 futures () and
“Asia is not really involved in this second or third wave because it has its COVID largely under control,” said Rob Carnell, chief Asian economist at the Dutch bank ING.
“As a result, domestic economies seem reasonable. Exports will remain soft … but at home they are still OK and doing much better than (Europe and the US).”
Oil rose from a four-month low overnight and risky Australian and New Zealand dollars rose about a quarter.
Still, both currencies, for the time being, are leading to weekly losses against the dollar and the euro, as worries about the new locks seemed to surprise investors.
In France, people have to stay at home from Friday, in addition to buying basic goods, seeking medical care or exercising. Germany will close bars, restaurants and theaters from 2 to 30 November.
“Until yesterday, the market was traveling in the hope that improving health care services to deal with the pandemic would prevent the introduction of serious locks,” said Rodrigo Catril, general manager of the National Bank of Australia (OTC 🙂 FX.
“At least in Europe, that momentum has changed … the question now is whether the US states will follow.”
Central Bank meetings and financial data are the main focus later on Thursday, amid uncertainty over the November 3 US election, which also keeps investors on the rise.
The Bank of Japan is ready to maintain its huge stimulus program and is committed to taking further action if the economic collapse of the virus threatens to return to deflation.
Investors expect the European Central Bank to delay new measures and instead suggest action in December, which is likely to maintain a cap on the euro.
The common currency reached a 10-day low on the dollar and a 100-day low on the yen overnight before recovering slightly. Bought last $ 1.1751.
German unemployment and inflation data, European confidence surveys and advanced US GDP data will also be closely monitored – with the US figure showing a record growth but still leaving the economy behind started in 2020
“Any frustration with these numbers could have a major impact on the market, given the current weakness,” said Michael McCarthy, chief strategist at CMC Markets in Sydney.
Investors are also increasingly wary of a controversial U.S. election result that could trigger a surge in risky asset sales.
The Wall Street “fear index”, the Cboe volatility index () rose to its highest level since June on Wednesday, and a rise in tacit currency volatility indicates a wild move is expected.
One week yuan implies instability
The US bond market, however, was proud as investors looked at polling day and estimated that there would be huge government borrowing for coronavirus relief spending, regardless of who wins.
10-year yields in the US () increased overnight and added about a basis point on Thursday to 0.7894%.
“Looking ahead, increased volatility before the election and possibly even after the election will eventually subside,” said Seema Shah, chief strategy officer at Principal Global Investors.
“Markets will soon redefine a course determined by the fundamentals, not the elections.”