Twas the last trading session before Christmas and across the bourse, scarcely a punter was stirring as a matter of course.
The portfolios were hung up with year-end care, after a December full of nightmare. Fund managers were tucked into their holiday beds, with visions of compliance leave dancing in their heads.
That left analysts shaking their heads as Santa left Wall Street year-end lumps of coal in the form of an extended market drop last week.
Stephen Innes, head of Asia Pacific trading at OANDA, said on Monday that 80 percent plus of traders were sidelines, and the rest were in a risk-off mood.
“Loss aversion and the herd mentality took over as individuals’ tendencies toward irrational investment decisions were on full display post FOMC,” Innes said in a note on Monday. “I still don’t know if the market necessarily knows what to make of the last Fed hike, as I’ve never seen a post rate hike debate go on this long.”
He pointed to concerns that global pension funds have been divesting equities in favor of bonds, as well as other larger-scale concerns over headlines from the U.S.
That included reports that U.S. President Trump had discussed firing Federal Reserve chief Jerome Powell after last week’s interest rate hike in a move that would be an unprecedented attack on the central bank’s independence. But various White House advisers have stepped up to reassure markets, with the incoming chief of staff, Mick Mulvaney, saying that Trump “now realizes he does not have the ability” to fire Powell.
Bloomberg has reported, citing its own analysis, that interest rate hikes cost the embattled president around US$5 million a year because he took out US$340 million in variable-rate loans from 2012-2015, an odd financial decision to make at a time when the Fed was already beginning to exit its ultra-loose policy.
Fed under the gun?
“What is even more bizarre is that the president seems unconcerned that his constant Fed berating makes the FOMC committee even more resolute to prove their independence and stay the course on monetary policy,” Innes said.
In other news bending market sentiment, the U.S. government shutdown over the weekend after Trump refused to sign on to any budget deals unless his plan for wall on Mexico’s border is funded, with aids saying the standoff could continue into the new year.
“Adding this kind of political uncertainty on top of the mountain of economic and financial risks around the world is bound to hurt markets,” Innes added.
Other analysts pointed to clouds on the U.S. economic horizon as well.
“The downside risks facing the U.S. economy are significant: an uncertain fiscal outlook, Brexit, Italy, slowdowns for U.S. trading partners, disruptive trade policies, and a set of disputes with China that are expanding in scale and scope. Financial conditions have tightened and they may go further,” Nomura said in a note last week. “Next year is likely to be challenging for both investors and policymakers.”
South Korea’s Kospi index was down 0.39 percent at 8:16 A.M. SGT. Japan’s market was closed for the Emperor’s Birthday.
Singapore’s Straits Times Index was down 0.15 percent at 3046.04 on Friday; December futures for the index were at 3046 on Friday, while January and February futures were at 3049 and 3051.
Hong Kong’s Hang Seng Index added 0.51 percent to 25,753.42 on Friday, while China’s CSI 300 shed 1.24 percent to 3029.395.
Malaysia’s KLCI was up 1.19 percent at 1670.28 on Friday, while Indonesia’s IDX Composite gained 0.26 percent to 6163.60.
The Dow Jones Industrial Average dropped 1.81 percent to 22,445.37 on Friday, the Nasdaq Composite tumbled 2.99 percent to 6332.995, and the S&P 500 shed 2.06 percent to 2416.62. Futures for the three indexes were nearly flat in early trade.
Nymex WTI crude oil futures for February were flat at US$45.59 a barrel at 7:53 A.M. SGT, while ICE Brent crude futures for February were down 0.35 percent at US$53.63 a barrel, according to Bloomberg data.