Asian Stock Market: Rebounds despite weak S&P500 futures, DXY remains mute, PBOC intervenes
|- Asian indices have rebounded firmly despite the absence of support from S&P500 futures.
- The PBOC has intervened in currency markets to provide a cushion for the weakening yuan.
- The DXY is declining towards a two-week low at 110.76 while alpha on US government bonds has tumbled.
Markets in the Asian domain have rebounded sharply after individual headwinds despite a vertical fall in the S&P500 futures. The 500-stock futures basket has tumbled 0.90% after a three-day buying spree as tech-giant Microsoft (MSFT) has trimmed its sales growth forecast by 5%. In the opinion of economists at Morgan Stanley, the rally in S&P500 could be extended well into the 4000/4150 area. Therefore, a decline in the US index could be considered a corrective move.
At the press time, Japan’s Nikkei225 gained 0.84%, ChinaA50 jumped 1.15%, and Hang Seng soared 1.43%. Indian markets are closed on account of Diwali Balipratipada.
Chinese markets have rebounded sharply as investors have shrugged off uncertainty that rose after China’s XI Jinping’s leadership for the third term got the green signal. Meanwhile, Reuters reported that the People’s Bank of China (PBOC) intervened in currency markets to support the weakening yuan. Reports claim that Chinese state-owned banks sold U dollars both in onshore and offshore markets on Tuesday.
Japanese investors have shifted their focus towards the interest rate decision by the Bank of Japan (BOJ), scheduled on Friday. BOJ Governor Haruhiko Kuroda is expected to continue dovish tone on interest rates to safeguard the economy against external shocks. Prolonged weakness in the Japanese yen is impacting importers dramatically. Purchases of imported goods from oil to food products need US dollars for payouts, which are hurting firms that bank upon raw materials from foreign suppliers.
On the US dollar index (DXY) front, the mighty DXY is displaying a sheer downside move after failing to sustain above the 111.00 hurdle. The DXY is expected to surrender the two-week low of 110.76 amid overall optimism in market spirit. The 10-year US Treasury yields have dropped further to 4.08%.
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