Home / Blog / Market Analysis / Asia Open | Stocks: Given the ridiculously impressive risk recovery, it’s not surprising to see small wobbles and bobbles sidelining investors

Asia Open | Stocks: Given the ridiculously impressive risk recovery, it’s not surprising to see small wobbles and bobbles sidelining investors

Market Analysis / 2 Min Read
Stephen Innes / 10 Jun 2020

US equities were weaker Tuesdaythe S&P down 0.8% following declines in Europe. There’s been nothing especially new to shape sentiment, the market instead taking something of a pause after the substantial post-payroll gains as risk turned less bullish.

Asian stocks are poised for a lower start Wednesday after a retreat in US equities and concerns the recent risk-asset rally had run too far. As has been the steady follow-through narrative, Asian equity markets will look to take their lead from US equities. 

US stock markets are up almost 45% since the March lows, which is easily the most significant rise in the shortest time ever. The current sell-off (across all assets) seems a little overdone in the context of the ongoing bullish narrative. Nonetheless, there’s profit-taking and squaring of positions leaking into the fray in front of the FOMC.

Given the ridiculously impressive risk recovery, it’s not surprising to see small wobbles and bobbles sidelining investors, giving the market a breather and a chance to consolidate.

Without stating the obvious, Wednesday's FOMC decision will determine whether the pause extends a little longer or not. If the Fed doesn’t take any further action, risk sentiment might cool its jets for longer. 

While uncertainty ahead of this week's FOMC meeting is likely to keep bullish ambitions at bay, it doesn’t feel like investors need much of an excuse to sit on their hands.

A second wave of the virus is the biggest threat to the ongoing recovery in markets and the economy. However, another risk could be mounting: complacency. Recent data and the strength of equities may lead policymakers to step back from providing support. Indeed, if Mitch McConnell, the Republican Senate majority leader, had his way, it would be cut as he thinks the economy is already on the mend. 

Closer to home, the outbreak of the virus has led to increasing tensions between Australia and China, which has been reflected in the form of tariffs and more stringent screening on foreign investors. However, even before the virus there were signs that China was starting to pull back from investing in Australia. According to the "demystifying Chinese Investment in Australia" report by KPMG and the University of Sydney, Chinese investment in Australia fell 58.4% last year to AUD$3.4bn, the lowest since 2007. The number of deals fell from 74 in 2018 to 42 last year, with one accounting for 43.7% of the year's total.

The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

More on this topic

See More News

Open your account. Trade within minutes.

Start your trading journey with a trusted, multi-award winning broker.

Open Account Try a Free Demo