EQUITIES
Shares in Asia-Pacific were mixed in Tuesday trade as the liquidity crisis over at China Evergrande Group continued weighing on investor sentiment regionally. The Hang Seng index dropped 0.72%, shares of China Evergrande Group in the city fell more than 2%, while the Hang Seng Properties index slipped 0.26%. Japan slid after reopening following a holiday, down 1.97%
Elsewhere, the S&P/ASX 200 in Australia rose 0.13%, the while the Straits Times index in Singapore gained 0.37%, and the S&P BSE Sensex in India added 0.23%.
Markets in mainland China and Taiwan are still closed for a public holiday on Tuesday for mid-Autumn festival while Korean markets remain shut through Wednesday.
Overnight on Wall Street, the S&P 500 saw its worst day since May, dropping 1.7% to 4,357.73. The Dow Jones Industrial Average plunged 614.41 points to 33,970.47 while the Nasdaq Composite fell 2.19% to 14,713.90. Economically sensitive sectors, including financials and energy, were hit particularly hard.
OIL
Oil prices rebounded after a two-day decline, drawing support from signs that some U.S. Gulf output will stay offline for months due to hurricane damage.
The Brent now traded at $74.07 per barrel, while U.S. crude futures traded at $69.38 per barrel.
Overnight, the Brent ends at $73.92 a barrel, and the WTI at $70.29 per barrel.
CURRENCIES
The dollar index, which measures the currency against six major peers, was little changed at 93.191 after rising overnight to 93.455 for the first time since Aug. 23.
The 10-year U.S. Treasury yield crept up to 1.314%, though moves were relatively subdued as investors looked to the U.S. Federal Reserve's two-day policy meeting starting later today.
Cryptocurrency prices slumped as a broad selloff sparked by worries about contagion from China Evergrande Group swept through global markets. Bitcoin down more than 3% to around $42,780, while the smaller rival ether slid to $3,012.
GOLD
Gold held onto gains as Wednesday’s Fed meeting looms. Policymakers are expected to start laying the groundwork for paring stimulus.
Spot gold eased 0.1% to $1,762.10 per ounce, while U.S. gold futures edged unchanged at $1,763.50.
ECONOMIC OUTLOOK
Global stock markets skidded on Tuesday, grappled with contagion fears sparked by troubles at property group China Evergrande as growing risks the property giant could default on its massive debt pile prompted investors to flee riskier assets. The dollar firmed.
Selling pressure persisted in early trade in Asia ahead of a major test for Evergrande this week, which is due to pay $83.5 million in interest relating to its March 2022 bond on Thursday. It has another $47.5 million payment due on Sept. 29 for March 2024 notes.
Failing to settle the interest within 30 days would put the bonds in default. On Monday, Chinese regulators warned that the company's insolvency could fuel broader risks in the country's property sector and financial system if not stabilised.
The U.S. Federal Reserve is due to meet on Tuesday and Wednesday as investors look for the tapering timeline on its bond purchases as well as its board members' long-term rates and economic projections.
Investors were also keeping an eye on other central bank meetings spanning Brazil, Britain, Hungary, Indonesia, Japan, Norway, the Philippines, South Africa, Sweden, Switzerland, Taiwan and Turkey.
TECHNICAL OUTLOOK
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 110.049 and 110.335.
- Support line of 109.126 and 108.841.
Commentary/ Reason:
The dollar rose 0.20% to 109.608 yen, trimming some of its overnight losses.
The pair however still meandering near the middle of the trading range of the past 2-1/2 months, as investors sought shelter into safe haven from a potential China Evergrande default.
Gains in the T-note yields fuelled some liquidity demand for the dollar.
On the other hand, the Japanese yen found some bidding over the rising concerns of the Delta variant in the Asia-Pacific region.
The Bank of Japan decides policy on Wednesday, with no change expected to its massive stimulus programme, while the U.S. currency had already been rising on expectations the Federal Reserve will signal a start to stimulus tapering at a two-day policy meeting, also on Wednesday.
Yen’s overnight selloff would suggest the pair’s bullish is retained for a re-test of aforesaid resistance, at 110.049, and break would extend second resistance line at 110.335.
On the downside, monthly low is set as the first support, at 109.126, followed by retracement to 108.841,
