Markets Aug 18

Markets edgy on fresh US Huawei ban, Australia up on easing hopes

US Commerce Dept further restricted Huawei Technologies access to US technology and added another 38 affiliates to the entity list

Markets edgy on fresh US Huawei ban, Australia up on easing hopes
Joaquin Gutierrez poses in front of the house where he is renting a room, on August 10, 2020, in Van Nuys, California. The 'Cancel Rent' movement is gathering steam with protests across the US as Americans hit hard by the coronavirus pandemic pile up debts. Activists want landlords to suspend rent obligations for those in the most dire straits, having lost their jobs in the economic chaos sparked by the virus crisis. Photo: Valerie Macon / AFP.

(ATF) Australian markets are outperforming the region after Reserve Bank minutes revealed the central bank “affirmed its commitment to supporting jobs, incomes and businesses” and that “underlying inflationary pressures would remain subdued for a considerable period”.

The sentiment was muted across the region after Washington announced new restrictions on Huawei Technologies, as the market braced for intensified tensions between the world’s two biggest economies.

Australia’s S&P ASX 200 rose 0.84%, while Japan’s Nikkei 225 was down 0.28%, China’s mainland index the CSI 300 edged up 0.12% and Hong Kong’s Hang Seng benchmark inched up 0.15%.

“The minutes of the latest RBA meeting show that the Bank has become more worried about the impact of high unemployment on inflation and reveal that the Bank has become more inclined to ease policy further,” Marcel Thieliant, senior Australia & New Zealand economist at Capital Economics, said.

“We think additional government bond purchases aimed at longer maturities are the most likely tool.”

Meanwhile, the United States Commerce Department further restricted Huawei Technologies access to US technology and added another 38 affiliates to the entity list.

“As we have restricted its access to US technology, Huawei and its affiliates have worked through third parties to harness US technology in a manner that undermines US national security and foreign policy interests. This multi-pronged action demonstrates our continuing commitment to impede Huawei’s ability to do so,” Commerce Secretary Wilbur Ross said.

These political tensions mean Asia is ignoring Wall Street’s overnight gains after the S&P 500 gained 0.27%, and the Nasdaq Composite added 1%. Still, the Dow Jones Industrial Average eased 0.31%.

Safe havens were in demand with gold inching back hovering around $1,992 while US Treasuries also gained. The 10-year yield is down 2 bps to 0.68%. The US dollar weakened with its value against a basket of currencies down at 92.62.

Asian credit markets are firm with the Asia IG index moving in a basis point at 65/66 bps and the responses to new issues remain solid.

Hysan’s perpetual bondKT Corp, which issued a mandate for a short to intermediate bondChina Jianyin’s two-trancher and Yangzhou price guidance are some of the issues keeping investors busy.