US equities rally continues

The return of the K-shaped recovery trade saw equity markets continue to rally strongly overnight. With monetary policy expectations steamrolling any US election uncertainty, the pre-election status quo, albeit with different lead actors, seems sure to continue. The S&P 500 and Dow Jones rose 1.95%, and the Nasdaq soared 2.59%, capping a spectacular week for Wall Street.

US index futures have fallen in Asian time though, probably on profit-taking, as well as some uncertainty on the incredibly close continuing vote counts in the US swing states still to complete. It has taken the wind out of the sails of Asian markets today, which are likely to be taking risk off the table ahead of the weekend and this evening’s US Non-Farm Payrolls data. That has led to a very mixed picture in Asia today.

The Nikkei 225 has risen by 1.0% and is now nearly 6% higher for the week. The Kospi is flat, but mainland China markets have retreated slightly, perhaps also weighed down by the cancelled Ant Financial IPO. The Shanghai Composite is 0.45% lower, with the CSI 300 down 0.35%, and Hong Kong is unchanged.

China publishes its Balance of Trade on Saturday, with the trade surplus forecast to increase to USD46 billion. Imports are expected to retreat from the September reading and will be the more closely watched component. Imports are forecast to increase YoY by 9.50%, but if that number comes in substantially lower, regional Asian markets may react with losses on Monday morning.

Singapore is down 0.60%, with Jakarta 0.40% higher, as is Taipei. Kuala Lumpur is also 0.35% higher ahead of the budget today. Australia is coat-tailing Wall Street overnight, after a dovish RBA policy statement this morning. The ASX 200 is 0.90% higher, with the All Ordinaries 0.70% higher.

Although Asian equities are mixed, stock markets in the bigger picture will be in buy-the-dip mode from now on, no matter what the US election result is now, or however long it takes to complete.