Stocks and industrial commodities rallied on Friday night in a reversal of the previous session’s pressure on risk assets. However currency and futures trading this morning indicate another slide in sentiment over the weekend, and the Asia Pacific trading day may be more negative than initially indicated.
Reports of a new Covid-19 lockdown in Beijing speak directly to market fears that the measures taken to contain the virus so far are not enough. Authorities closed a major fruit and vegetable outlet and locked down several residential areas. Increasing infection rates in some parts of the US add to the secondary outbreak worries.
Index futures for regional markets finished flat to slightly higher on Saturday morning after gains for European and US shares, but at this morning’s US futures opening most of the Friday night gains were reversed. US SPX future traded down more than 50 points, compared to Friday night’s 39 point rise.
Currency markets paint a similar picture. The US dollar and Japanese yen are firmer, while the growth exposed New Zealand and Australian dollars are under pressure. Gold and bonds remain elevated
China retail sales and industrial production releases today may influence trading. Consensus forecasts point to a 5.0% bounce May in industrial production, although retail sales are expected to slide a further 2.3% month on month. Any positive surprises may be discounted by the secondary infection fears, but a miss could deepen the risk off atmosphere.