Asia bourses traded mixed-to-positive as the region took its cue from Wall Street. The major indices finished relatively flat after having meandered near their record levels following uneventful FOMC Minutes. Fed members noted that the economy was far from the Fed’s goals, and the path ahead was uncertain amid the pandemic but saw inflation risks as broadly balanced. Nikkei 225 softened amid reports Japan considers stronger COVID-19 controls in Tokyo and other cities. Losses cushioned by recent M&A news, including the buyout offer for Toshiba and Hitachi, said to be in discussions with Bain regarding a potential sale of Hitachi Metals, which boosted shares of the latter by nearly 5%. Hang Seng and Shanghai Composite traded mixed with sentiment in the mainland clouded by ongoing tensions in the South China Sea after the US warned China of its increasingly aggressive moves. Simultaneously, Hong Kong was underpinned by strength in the tech sector aside from industry heavyweight Tencent which was pressured on reports its largest shareholder plans to offload around USD 15bln of company shares.
In Wall Street, equity markets built on recent gains with no macro catalyst. The bias was towards tech, with cyclical/value styles underperforming. The rotation into value has paused as markets await further catalysts in the coming weeks. The global impulse towards value may resume when there are positive updates on the pandemic front out of Europe, which is lagging in its pandemic response. The main focus starts shifting to next week’s events, where Fed Chair Powell and Vice Chair Clarida will deliver remarks; the US CPI and retail sales data will be released, with traders expecting a more robust reading on both readings. There may also be a pivot onto corporate fundamentals as earnings season gets underway, with bank reporting season starting mid-week. Geopolitical themes are worth keeping an eye on, with improving dynamics between the US/Iran after officials from both sides calling recent talks in Vienna productive and the other signatories of a 2015 agreement on Iran’s nuclear program work to revive the deal. The situation between Russia/Ukraine is getting worse, with some reports suggesting the US is mulling sending warships to the Black Sea.
