Asian markets were mixed today after the Dow Jones Industrial Average slid 1 percent and other US indexes followed closely behind, as Chinese growth surprised to the upside.
Economic analysts say that investors are taking a look at the stock market as a possible pivot point this week. News from Japan, the world’s third-largest economy, indicated a decline of 1.9 percent in the manufacturing index for May. The Chinese trade data out this morning was the major addition to the mix, bringing it to an expansion of 6.5 percent, according to figures released by the Chinese government. This number fell short of expectations. Despite the unexpected rebound, some analysts cautioned investors not to jump into the whole market with both feet.
“Investors now should approach the US markets with a more cautious and selective approach,” said Pollyanna De Lima, Head of Global Equity Strategy at Societe Generale, who warned that the market is overbought and could be vulnerable. “Overall, the current sentiment tilt towards equities will remain a challenge for investors.”
While the decline in equities would have a bearish effect on Asian markets, such as Singapore, Hong Kong and China, some took notice of the positive reaction in the Asian markets, which signaled a potential refocus of investment towards Asia. The trade optimism may also feed into moves to attract more Chinese investors to China. In addition, the declining fall in the yield on US Treasury bonds is likely to improve the prospects of the US economy overall, even if it has come at the expense of Asian equities.
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“Today’s data from China presents a positive focal point for the Asian markets,” said Guido Fassbind, Chief Investment Officer at Equitrust “As investors recognize that the US yield curve is a sign of risk-aversion in the market, we expect the 2-3 year yield in particular to contribute to adding positive momentum to our investment.”
China’s trade rebounded despite the tariffs currently being levied on them by the US. In addition, both Singapore and Hong Kong were up by 1 percent, with Taiwanese stocks up by 0.62 percent.