US Manufacturing PMI sends US and Asia markets higher
The impressive outperformance by the US Manufacturing PMI overnight, rising to 59.3, lifted pre-election spirits on Wall Street. The data was all the more impressive with all the sub-indexes also outperforming, hinting that the US recovery is navigating the Covid-19 storm. The S&P 500 leapt 1.23%, the NASDAQ rose 0.42%, and the Dow Jones rallied 1.52%.
Asia and Europe mostly outperformed, with China and Germany all posting strong PMI data. That was enough for Wall Street to put election jitters behind them and load up again on equities and pro-cyclical risk assets.
However, a huge caveat for Germany and Europe now will be the new Covid-19 lockdowns. I expect that the “risk-on” tone of the overnight session is likely to run out of steam today, however, as the US polling booths open. I still see the potential for short-term equity weakness.
The Wall Street rally has lifted Asian stock markets, which are rising for the second day in a row. The Nikkei 225 has jumped 1.40%, after an impressive rally yesterday. On further consideration, Japan equities may be benefiting from haven flows ahead of the US election. The KOSPI has leapt 1.85%, with the Shanghai Composite and CSI 300 up 1.40%.
Meanwhile, the Hang Seng has leapt 2.25%, probably on Ant Financial IPO fever, with the shares allegedly trading 50% above the IPO price in the grey market ahead of official trading on Thursday. Taipei is 1.10-% higher with Singapore 1.20% higher, while Kuala Lumpur lags, flat for the day ahead of the Bank Negra Malaysia rate decision and the 2021 budget on Friday.
Australian markets have also leapt ahead after the RBA rate cut. The ASX 200 and All Ordinaries are 2.0% higher today.
The powerful move higher in Asia hints at the latent demand and FOMO-ness still out there in global equities. Although further gains ahead of the election will be elusive, if the US election passes relatively smoothly, the “buy-everything” trade will be back with a vengeance.