Sinopec Scandal Drags On Chinese Equities, EU Markets Play Catch-Up, No Follow-Through For US Market

Markets in Asia were firmly mixed following the massive rally in US stocks Wednesday. The rally, driven by oversold conditions and fueled by weak Holiday trading volume, recovered all the losses posted by US equities over the previous two trading days but the gains were not projected into all trading markets.

Asia Mixed In Wake Of Dow Industrials Record Breaking Rally

The Japanese Nikkei posted the largest advance on Thursday, up nearly 3.90%, but other indices in the region were not so lucky. The Nikkei was lifted by news Apple’s iPhone Xr had taken 32% of Apple’s iPhone sales just 30 day’s after its release. Shares of Japan Display, maker of iPhone Xr screens, surged nearly 6% on the news.

The Korean Kospi also advanced on strength in tech, gaining near 1.90% on Thursday, while the Australian ASX closed with a microscopic 0.02% increase. The Chinese-focused indices, the Shang Hai Composite, Shenzen, and Hong Kong Heng Seng all posted losses on word top-officials in China’s state-run energy company China Petroleum and Chemical, also known as Sinopec, had been suspended. The officials, in charge of the companies trading arm, have been accused of misconduct related to company losses.

EU Markets Fall Despite The Massive US Rally

Equity in the EU fell across the board in Thursday trading. These bourses, closed since last week, are playing catch-up with the US market which posted huge losses on the last two trading days before Christmas. The German Dax was leading at midday with a loss near -2.0% while others in the region were showing smaller losses (-1.25% FTSE and -0.40% for the CAC). The DAX is now in bear-market territory, down about -22.0% from its peak set earlier this year.

The retail sector was one of few to show gains in Thursday trading, buoyed by a report from Mastercard. Mastercard says holiday sales topped 5.0% growth from last year, accelerated at their fasted pace on record, and hit a decade high. EU retailers were up about 1.25% on the news.

No Follow-Through For US Indices

US traders breathed a sigh of relief on Wednesday when the major indices staged a record-breaking rebound. The Dow Jones Industrial Average surged more than 1,000 points, its largest point gain in history, but the positive sentiment did not carry over into Thursday trading.

Futures are pointing to a negative open for the major indices on Thursday. The Dow Jones INdustrial’s is indicated to give up nearly half of its Wednesday’ gains on word the White House is about to issue an executive order barring US business from purchasing products from Huawei and ZTE. This news, not unexpected, is in sharp contrast to hopes US/Sino trade relations were thawing, and word from China that US and Chinese officials were set to meet in January. Traders should expect more volatility in today’s trading with a possible retest of support levels confirmed in Wednesday trading.