Oct 5 (Portal) – A look at the day ahead in Asian markets by Jamie McGeever
Real turning point or classic bear market rally?
World markets continue to rise as the dollar, bond yields and Fed rate expectations fall, confusing even the most bullish optimists who had called for a positive start to the fourth quarter.
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The strength of the reversal suggests that the turbulence of recent weeks may be partly related to quarter-end factors. Likewise, the strength of the current noise could simply be short coverage to recoup some of this year’s losses.
According to Goldman Sachs, the average decline in the S&P 500 from peak to trough in past bear markets has been 34%. That would coincide with the 3400 area off its January high of around 4800. Friday’s low was just below 3600, 25% off the high.
By this measure, Wall Street must continue to fall before hitting the final bottom. It’s worth remembering that bear market rallies tend to be fairly quick, ending almost as quickly as they started.
diagram
Tuesday’s “Risk-On” rally was widespread. The S&P 500 posted its strongest two-day gain — more than 5% — since March 2020, and EM debt had its best day since March this year.
US job vacancy data fueled hopes that the Fed would soon be taking its foot off the tightening pedal, Australia’s central bank hiked rates by just 25 basis points and the dollar tumbled more than 1% to end its longest five-day losing streak since recorded over a year year.
It could turn out to be a bear market rally, but for now, investors are enjoying the ride.
Key developments that could give markets more direction on Wednesday:
Australia PMIs (September)
Inflation in South Korea (September)
Eurozone, UK and US Purchasing Managers’ Indices (September)
US Services ISM (September)
Bostic of the Fed speaks
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Reporting by Jamie NcGeever in Orlando, Florida. Edited by Josie Kao
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