Asian Markets Rise on Wall Street Gains

The Catch Up

• Markets in Asia continued their rise today, reaching record highs, with Japan's Nikkei hitting a three-decade peak. Investors appear to have been looking over the rising coronavirus cases and the short-term political unrest in the United States (until January 20 when Joe Biden will be officially the new president) and instead focus on the potential for an economic recovery later in the year, perhaps also aided by US fiscal aid.

• Excluding the CSI300, markets were in the green all over Asia, led by the KOSPI which was up 3.4%. The Nikkei which rose by 2.13% while the Hang Seng was up 1%. Futures were also in the green, with the US500 and the DAX rising by 0.44% and 0.6% respectively.

• The CSI's behaviour is most likely an outcome of reports suggesting that the Trump administration was considering banning U.S. entities from investing in an expanded list of Chinese companies in the waning days of the presidency.

• There is also the other side of the coin: as US investors dump shares in Chinese companies blacklisted by outgoing President Donald Trump, bargain hunters in China are taking the opposite side of that trade, wagering that a Joe Biden presidency will reverse the investment ban. Since the order was announced, holdings by mainland Chinese investors in the Hong Kong-listed shares of China Railway Construction Corp (CRCC) and CNOOC Ltd roughly tripled.

• Asian bourses were also in line with all three Wall Street indices hitting record highs yesterday, as bond yields continue to rise and investors hope that a new Democrat-led government could lead to more spending and less volatility.

• Analysts note that market participants are fairly optimistic with how the world is moving and particularly in the United States where the potential for more stimulus increases by the day. Furthermore, investors continue to hope that the vaccines will have the desired effect on the population, both shielding people and reviving the economic sectors which were most affected.

• Nonetheless, Covid-19 remains a major issue around the world. Australia has been the last country to enforce a lockdown, with Brisbane faced with a three-day pause in transport following the discovery of a case of the more contagious UK variant of the virus. At the same time, most of Europe is now under strictest restrictions, according to the Oxford stringency index.

• However, there is light at the end of the tunnel: Pfizer Inc and BioNTech's Covid-19 vaccine appeared to work against a key mutation in the highly transmissible new variants of the coronavirus discovered in the UK and South Africa, according to a laboratory study conducted by Pfizer. Still, the study was not peer-reviewed.

• In an unexpected turn of events, US government officials have begun weighing the removal of President Donald Trump from office, even before Biden's inauguration date on January 20, after Trump supporters stormed the US Capitol building.

• That said, risk appetite continues to rise: benchmark 10-year US yields moved higher to 1.0998% on Friday, up from 1.017% on Thursday. Analysts base this on hopes for a synchronized global recovery in the second half of the year, with investors taking a slightly longer view on their positions.

• In the crypto world, Bitcoin dropped by more than 5% yesterday, to $37,377 after topping $40,000 for the first time, based on high demand from institutional and retail investors. Market watchers have said a pullback is likely following its recent run-up.

• On the company front, South Korea's Hyundai Motor Co said on Friday it was in early, unspecified talks with Apple, after a local broadcaster said the pair were discussing an electric car and battery, sending Hyundai shares surging 24%.


Currencies

• The dollar also strengthened on hopes of a meaningful economic recovery later this year, even though this could just signify some profit-taking behaviour.

• The gains were not large, as the greenback pulled up from a 3-year low, with analysts underlining that the move is more about consolidation than correction.

• As a result, the Euro was last at 1.2268, after dropping 0.5% yesterday, while the Yen eased slighlty to 103.84. Similarly, the Aussie was little changed.


Oil & Gold

• In commodity markets, oil traders continued to focus on Saudi Arabia's pledge to deepen production cuts as oil prices were also aided by a larger than expected drawdown in US inventories.

• Prices were last at $54.50 for Brent and $50.97 for WTI, just shy of 11-month highs reached yesterday.

• Analysts noted that strong global equity markets, backed by excessive liquidity, prompted f