US markets slide on election, Covid-19 concerns

Led by Europe, Wall Street was crushed overnight by US election and Covid-19 fears, eroding the blue wave positioning prevalent in markets in recent weeks. The S&P 500 fell 3.10%, the Nasdaq fell 3.20%, and the Dow Jones fell by 3.42%.

However, the news has not been entirely grim, with the aftermarket futures on all three indices over 1.0% higher in Asia. Short-term profit-taking from the overnight session, and the Biden consultation story regarding Chinese tariffs, have stopped the rot and helped Asian stock markets to weather the overnight storm.

The Nikkei 225 is down only 0.40%, although the more volatile South Korean Kospi has fallen 1.65%. In China, both the Shanghai Composite and CSI 300 have actually reversed initial losses and have climbed into positive territory, with both climbing 10%. The Reuters story about Biden and China appears to be behind the upside reversal. The Reuters report suggests that all of Biden’s allies will tell him to get rid of Chinese tariffs and lower tensions between the US and China, the two largest economies in the world. The keyword is “consult,” which doesn’t mean it will follow a path of action.

Regionally though, Hong Kong remains down 1.10%, with Singapore down 0.80%, Thailand down 0.80% and Taiwan down 1.10%. Indonesia and Malaysia, along with most of the Middle East, are closed for a holiday today. Australian markets, with their high beta to Wall Street, are the regional worst performers, the ASX 200 and All Ordinaries are 1.80% lower.

The dollar-bloc Australasian markets remain the most vulnerable to more downside, with China anchoring regional Asian markets. That said, the storm clouds across Europe and the US are likely to thicken over the coming days, meaning any rallies are likely to be short-term. Asian markets should outperform but will not escape the dark embrace of US and European turmoil entirely.