With China heading into the golden week holiday to mark the country’s National Day, the expectation may have been for regional equity markets to be looking rather uneventful, but the increasingly violent pro-democracy demonstrations in Hong Kong served to hammer the Hang Seng index during Monday’s session. There’s a real degree of concern building amongst investors, with the risk being that any kneejerk reaction by Beijing could serve to fundamentally shift the business climate in the SAR. The reaction in London has been telling too, with HSBC and Standard Chartered – two banks with notable exposure to the area – being hit hard in early trade. Elsewhere the mood has been relatively muted – Shanghai has tacked on some modest gains, undeterred by affairs in Hong Kong, whilst the Nikkei is also finding support off the back of continued Yen weakness – USD/JPY touched 109.750 overnight.
Wall Street futures are currently suggesting we’ll see a rather downbeat start to the week, with the bulk of Friday’s gains currently on course to be eroded at the open. We do have some economic data on the agenda with pending home sales and personal spending data both having the ability to sway opinion on the timing of any fed rate hike, with the new month starting on Wednesday, Friday’s non-farm payrolls can be expected to dominate. Ahead of the open we’re calling the DOW down 84 at 17029 and the S&P down 8 at 1975.