Sell-off in US and Europe will push Asian shares lower

<p>Asian stocks will continue to take negative leads until the U.S. fiscal situation is solved, hopefully towards the end of this week. Overnight, European and […]</p>

Asian stocks will continue to take negative leads until the U.S. fiscal situation is solved, hopefully towards the end of this week.

Overnight, European and U.S. equities were heavily sold off on a range of issues, the most important was an absence of any good news, or circuit breaker, in an otherwise bleak global economic environment. Corporate earnings are starting to feel the pressure of this economic slowdown.

Computer maker Hewlett Packard forecast first quarter earnings recently missed estimates as personal computer sales slump. Earnings have been revised down to 83 cents per share from 86 cents per share.

We note this because trends in U.S. consumer electronics companies resonate with many Asia Pacific technology manufacturers particularly chip makers. The main news overnight was focused on the failure of lawmakers in the U.S. to reach an agreement on fiscal measures needed to address the rising debt situation.

Copper is a leading indicator of economic growth and it took another 3% tumble overnight but we also note LME stockpiles have been falling so there doesn’t seem to be a large overhang of supply on face value. The real test will be at the critical US$3/lb level which could eventuate should equity markets continue falling.

In regional currencies, risk tolerance it definitely reversing, as illustrated by the Australian dollar which fell below 99.00 US cents overnight and was last trading at around 98.38. The Japanese yen continues to hold on to its gains, with the USD/JPY last trading at around 76.88.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.