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Asian stock markets out performance intact despite stronger US dollar

It's been a weak start for the US stock market for the second trading week of 2021, with the S&P 500 declining by -0.66% to 3,799. The main culprits were the big tech stocks relating to online communications, after last weekend’s suspension of President Trump’s Twitter and Facebook accounts over risk of more incitement of public riots, following the insurrection seen in Capital Hill last Wednesday.

In addition, Parler app, an alt-tech microblogging and social network service popular among pro-Trump supporters and right-wing conservatives, had been removed by Apple and Google from their respective app stores; Amazon suspended its web hosting service for Parler.

Facebook (-4%), Alphabet/Google (-2.3%), Apple (-2.3%) and Amazon (-2.15%) led the decline in the NASDAQ 100, which fell -1.55% to 12,902, while cyclicals and small caps stocks outperformed. The Dow Jones Industrial Average fell -0.3% to 31,00, with the Russell 2000 almost unchanged at -0.03% (2,091).

Also, the rate of increase had started to steepen on US treasury yields since late December 2020. The 10-year yield jumped by 3 basis points yesterday to 1.15%, its highest level since 19 March 2020. The increase in US treasury yields tends to see a rotation into the laggards, like cyclicals/value plays such as industrials, materials and financials, and away from the technology-related stocks. Hence, the rising US treasury 10-year yield was another factor that contributed to the underperformance of the NASDAQ yesterday.

Despite the sell-off seen in several big tech stocks, the overall medium-term uptrend remains intact for the major US stock indices. One of the leading indicators to pay attention for a potential change in trend will the performance of semiconductor stocks within the information technology sector; one of the proxies of global growth. Interestingly, the iShares PHLX Semiconductor ETF (exchange traded fund) posted a rally of +1.01% (402.80) yesterday, another fresh record all-time high close.

Even though the US dollar had shaped a rebound since late last week against the major currencies; the US dollar index has gained by 0.54% (90.58) so far. The current rebound in the US dollar (more corrective rather than a change in its major downtrend in place since March 2020) had minimal negative repercussions for Asian stocks.

At this time of writing, most major Asian stock indices fared much better versus the overnight performances in the US stock market. Japan’s Nikkei 225 was almost unchanged at +0.06% (28,152), Hong Kong’s Hang Seng index rose +0.41% (28,020), the Hang Seng TECH index climbed +0.62% (8,721), China’s CSI 300 increased +0.51% (5,468), Australia’s ASX 200 dropped -0.03% (6,695), Singapore’s STI fell -0.28% (2,975), while South Korea’s KOSPI 200 underperformed, falling -0.70% (428.16).

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