US equities bounced overnight after market sentiment was tested this week. The Dow Jones index jumped 400 points while the NASDAQ 100 surged as much as 2.95%. The rally in US stocks was largely due to the rise in tech shares. Major tech companies such as Twitter and Google Alphabet took the lead on a better than estimated earnings per share value.

The optimism stemming from the tech sectors could be a confidence boost to investor behaviour in the short run. Nonetheless, it may be worth noting that the aftermath from the US-China trade war may have fewer impact on companies that provides digital services. For instance, many major US tech corporations based most of their sales on digital ads, cloud computing, and third-party retailing. These services require less raw materials, unlike other companies that rely more heavily on physical goods production that is impacted most by tariffs. Hence, market could reverse if the buoyancy from tech shares subside, provided that more US companies issued a lower profit or growth forecast in the remainder of October. 

A higher risk appetite in share markets saw an immediate retreat from safe havens assets. Gold prices declined and the Japanese Yen weakened. On the other hand, commodity markets were mixed on a stronger US dollar. Key industrial metals such as aluminium slid but copper fluctuated. Oil prices edged higher with no specific trigger. The key driver behind oil prices in the short run could be the concern about a rising US oil inventory and a lower demand prospect due to a slower global growth forecasted by the IMF. Other political factors such as the US sanctions to Iranian oil due from 4 November could remain a weight on investor thinking.

The US dollar strengthened overnight as the US Durable goods data smashed market expectations.  The Offshore Chinese Yuan edged closer to a historical low, with USD/CNH once touched above 6.96. The Euro slid further after the ECB left interest rates unchanged and stated that the monetary policy may remain “accommodative”. The British Pound slid further as anxiety on Brexit negotiation sustained. The Australian dollar remained under pressure on lower commodity prices. Analysts will focus on the US GDP data due tonight with the market forecast at 3.3%. Any deviation from market expectations could spark a higher movement in the US dollar and impact the currency markets.

Futures markets are pointing to a positive start for Asia Pacific equities. In particular the Australia stock markets could bounce, if local investors could ride on the optimism from the US overnight. The preference of value investing over the pessimism may lift investor confidence as well.