Asian equities tumbled on Tuesday with risk-aversion sentiments dominating the market.

Rising geopolitical uncertainties, EU political issues, US-China trade stand-off, and big US corporate earnings are the main elements that are weighing on sentiments. Crude oil prices tumbled over 4% last night following Saudi Energy Minister said the kingdom is ready to increase output to maintain a balance in the global oil market. The country currently holds the biggest spare capacity of around 2 million barrels, which is more than sufficient to cover the Iranian output drop as a result of sanctions.

Brent oil slumped over 4% to US$76.4 area, testing a 78.6% Fibonacci Extension level. The immediate support and resistance level can be found at around 74.5 (100%) and 77.3 (61.8%) respectively. Trend indicator SuperTrend (10,2) and 10-Day SMA are both sloped downwards, suggesting short term trend remains bearish.

US S&P 500 index closed 0.55% lower with energy (-2.67%), Industrials (-1.6%) and materials (-1.15%) among the worst performing sectors. The index future erased most of its pre-market losses of the day as investors’ focus shifted to earnings from geopolitical issues.

US earnings are under the spotlight, with technology giants Microsoft, Twitter, Alphabet and Amazon’s earnings due to release this week and they are facing scrutiny of a ‘reality check’ on the sustainability of top line growth. Besides, traditional blue chips including Boeing, AT&T, Ford and Intel will also release 3Q profits this week. Upbeat results will help to alleviate sell-off in Wall Street whereas poorer results will likely do the reverse.

US 10-year Treasury Yield has fallen 3.02 bps to 3.167 percent from a day ago, boosted by haven flows from risk assets. In the longer horizon, an above 3% 10-year yield makes equity investment less attractive than they are before on a risk-adjusted basis. As interest rates continue to rise and treasury yields break multi-year highs, cash and cash-like investments are becoming more valuable, pulling liquidity away from equities. Meanwhile, stock market valuation is pressurised by higher required rate of return as well as rising borrowing costs. That is the ultimate problem markets are facing now.

Crude Oil Brent - Cash

US earnings this week

NameTickerDateTimePeriodActualActual SourceEstimate
McDonald's CorpMCD US23/10/2018Aft-mktQ3 182.10Adjusted1.995
3M CoMMM US23/10/2018Aft-mktQ3 182.58Adjusted2.701
Caterpillar IncCAT US23/10/201819:30Q3 182.86Adjusted2.848
Texas Instruments IncTXN US24/10/201804:01Q3 181.58Gaap1.534
Boeing Co/TheBA US24/10/2018 Q3 18 Adjusted3.489
AT&T IncT US24/10/201819:00Q3 18 Adjusted0.944
Microsoft CorpMSFT US25/10/201804:09Q1 19 Adjusted0.96
Ford Motor CoF US25/10/201804:15Q3 18 Adjusted0.286
Comcast CorpCMCSA US25/10/2018 Q3 18 Adjusted0.61
American AirlinesAAL US25/10/2018 Q3 18 Adjusted1.134
Merck & Co IncMRK US25/10/201818:45Q3 18 Adjusted1.133
Twitter IncTWTR US25/10/201819:00Q3 18 Adjusted0.132
Franklin Resources IncBEN US25/10/201820:30Q4 18 Adjusted0.737
Intel CorpINTC US26/10/2018Bef-mktQ3 18 Adjusted1.153
Alphabet IncGOOGL US26/10/2018Bef-mktQ3 18 Gaap10.434
Amazon.com IncAMZN US26/10/201804:01Q3 18 Gaap3.101

By Margaret Yang in Singapore

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