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Market Commentary

US major indices close mixed; sentiment in Asia boosted by China trade data

• US stocks slipped amid renewed worries that the economic recovery is faltering, taking the S&P 500 down 0.3%. The Dow Jones Industrial Average fell 0.8%, dragged down by losses from companies like Boeing and Merck. However, growth stocks boosted the Nasdaq Composite to a record high close. At the same time, Chinese technology equities listed in the US jumped on bets that the worst of Beijing’s regulatory crackdown has passed.

• The increase in Covid-19 cases over the summer months in the US has prompted many employers to postpone plans to return to the office. The travel industry’s hopes for a resurgence in business trips also appear to be on hold.

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• In Asia, stocks rose following strong data out of China, while European equities gave up some of the gains notched in the previous session. The pan-European Stoxx 600 declined 0.5%. Tokyo’s Nikkei 225 rose 0.9% while the Hong Kong Hang Seng Index climbed 0.7% even as the property sector fell on concerns over highly indebted developer China Evergrande, which affected the Group’s shares and bonds. The Shanghai Composite surged 1.5%. Singapore shares edged up 0.24% amid a cautious trading session as the number of Covid-19 cases rise in the country. Asian sentiment was generally boosted by both Chinese import and export growth beating estimates. Exports grew 25.6% year-over-year in August while imports surged 33.1% over the same period.

• US fiscal developments and the Covid-19 situation related to the spread of the Delta variant is expected to form two key drivers of markets ahead. September is anticipated to be a busy month in the US political calendar, as we will obtain critical colour on the fate of the Democrats’ ambitious US$3.5 trillion budget resolution and President Jo Biden’s infrastructure bill.

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• Some analysts are revising economic growth forecasts lower as recent economic data have fallen short of expectations. Although risks related to the Delta variant remain a wildcard for markets, our base case expectations remain that notwithstanding a temporary negative impact on economic growth in the fourth quarter of the year, the global economic recovery remains broadly intact.