Summary:
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Further declines seen overnight in Asian benchmarks
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Hang Seng leads the declines; -4-5% on the week
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US indices remain close to record highs
There’s a growing disparity between US and Asian stocks this week with the former holding up well and major benchmarks close to all-time highs whereas the latter has come under some pretty heavy selling pressure. The worst hit has been shares in Hong Kong, with the Hang Seng index declining by almost 5% on the week largely due to the flaring up of troubles once more and the large scale civil unrest.
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The Hang Seng has seen strong selling this week after beginning with a large gap lower. The index has now handed back approximately half of the gains seen in the near 3-month rally from the August low in the past week. Source: xStation
While the chief source of the weakness in Hong Kong can be explained away as idiosyncratic, there is a risk that if these tensions continue to escalate they will attract greater attention and possibly start to weigh on broader risk sentiment once more - as we saw during the early summer. The latest data from mainland China overnight came in significantly worse than expected with consumer spending metrics softening and industrial production missing forecasts for the 3rd time in 4 months. This is a concern further afield and shows once more the adverse impact that tariffs are having on the economy.
The US president has been enjoying the recent rally in the stock market and is taking to social media almost daily to trumpet the gains. Is this a possible contrarian sign that he may be overconfident and set to do something rash? Source: Twitter
Hopes for further progress on the US-China trade front this week have yet to be fulfilled with Trump’s speech in New York offering little by the way of any new information. Fed chair Powell is due on Capitol Hill once more this afternoon but if his second day of testifying before politicians is anything like the first then there will be little for market participants to get excited about.
US stocks remain not far from recent all-time highs (ATH) with the S&P500 futures trading around 0.5% from their record peak of 3101 ahead of the cash open. The market has closed above its 10 day EMA for an incredible 25 consecutive sessions, reflecting the absence of any significant pullbacks during the recent rally. Source: xStation
