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Asian Shares Up on Positive China Data Release

November 2, 2020

Asian shares rebounded from one-month lows at the start of Monday’s session after strong data emerged from China. Factory activity grew at its fastest rate in a decade while oil prices fell as many Western countries moved back into Covid lockdowns.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed by 0.5% to 573.04. Australian shares rose by 0.4%. Chinese shares were higher with the blue-chip CSI300 rising 0.8% with the country’s vast industrial sector almost operating at pre-covid levels. Meanwhile, Japan’s Nikkei jumped 1.5%.

Global coronavirus cases surpassed 500,000 last week with Europe crossing the bleak milestone of 10 million total infections. The United Kingdom is grappling with more than 20,000 new cases a day while a record surge of U.S. cases is killing up to 1,000 people a day.

New covid lockdowns have raised concerns over the outlook for fuel consumption, sending Brent crude to a low of $35.74 per barrel, a level not seen since late May. U.S. crude went as low as $33.64. Underwhelming outlooks and results from some of Wall Street’s largest companies last week, including Apple and Facebook, further soured the mood and dragged U.S. stocks lower last week.

“Markets are looking ahead of Q4 and early 2021 where the growth outlook looks clouded given the move to stricter lockdowns in Europe,” Perpetual analysts wrote in a note.

They said a -1% hit to European growth would send global gross domestic product down by 0.5% over the subsequent 12 months. “The key question here is how long are the lockdowns needed to get the virus under control.”

E-Mini futures for the S&P 500 added 0.1%, with investor focus turning to the U.S. Presidential elections on Tuesday. Republican President Donald Trump has been trailing Democratic challenger Joe Biden in national opinion polls partly because of widespread disapproval of Trump’s handling of the coronavirus. Opinion polls in the most competitive states, which often decide the election, have shown a closer race, but still favour Biden.

The risk-sensitive AUD/USD slipped 0.4% to go below $0.70 for the first time since July. It was last at $0.7018. The USD/JPY was flat at ¥104.66, while the GBP/USD was slightly lowerker at $1.2931. The EUR/USD held firm at around $1.1640.

That DXY remained flat at $94.07. The index is at risk of a further downslide, depending on the outcome of the U.S. election. JPMorgan analysts said the market likely views a Biden win as “short-term neutral” but “long-term negative” as his expected tax policy outweighs the benefits from a large stimulus package.

“SPX may have upside to ~3400, but it would have larger downside depending on the details of the package, potentially to ~2,500,” they added.

On Friday, the S&P 500 SPX lost 1.21% to close at 3,269.96. The Nasdaq Composite dropped by 2.45% and the Dow Jones Index fell by 0.6%

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