With the migration towards safe havens, Asian equity bourses are likely to buckle once again under pressure on Tuesday.
North Korea’s latest threats
For markets, desensitised towards North Korean provocations, war represents a both a great loss of lives and a shock to the economy and is certainly not something sitting near the top of the list of possibilities. North Korea’s latest rebuttal towards the US, however, accuses the latter for having ‘declared war’ and claimed the right to down US bombers amongst other ‘countermeasures’. This had deviated from past threats, tuning up the risk sentiment by a notch. While these may remain a war of words until further actions, it had certainly served as distractions for a market otherwise focused on policies this week.
The impact had been apparent for US indices, with most seen in moderate red on Monday. Recording one of the steeper declines on Monday had been the NASDAQ index, dragged also by the technology sector. Prices ended down 0.88%, briefly touching a 3-week low. On the other hand, havens returned to favour with gold prices bouncing off the $1290 support, trading on either side of $1310 this morning. It had been no less for US treasures with 10-year yields down to 2.2%.
With the eclipse of North Korea concerns, the focus on insights from Fed speakers appears to have been drowned down. Nevertheless, we did hear from Chicago Federal Reserve President Charles Evans, reiterating his concern for inflation. This had capped gains for the US dollar index which settled at 92.600, failing to break through the 92.700 resistance. Barring a sudden turn of risk sentiment, speeches from Fed speakers including Fed chair Yellen’s will be the highlight in the US session today. Another hawkish reinforcement may be what is needed to push the US dollar through the resistance.
The streak of red is expected to retain for Asian markets this morning, as the heightened risk sentiment surrounding North Korea impacts the region. Giving way in the morning to losses had been the KOSPI and Nikkei 225, while the rest of the region are expected to fall in line with the dips. Meanwhile, the debatable concern over Apple’s order moderation may also mean that suppliers in the Asia region, particularly Taiwan and South Korea, could remain in the doldrums.
For the local STI which had largely weathered Monday’s gloom in Asia, risk sentiment may be a key dampener once again. Although, as things stand, the range bound trade between 3200 and 3250 still seems to be working. Watch for Singapore’s August industrial production and Hong Kong’s trade data due in Asia hours today.
Yesterday: S&P 500 -0.22%; DJIA -0.24%; DAX +0.02%; FTSE -0.13%