* E-mini S&P 500 futures rise 1%, oil steadies, dollar gains
pause
* MSCI AxJ losses muted compared with Wall St plunge
* Volatility gauges surge as U.S. election looms
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Tom Westbrook and Pete Schroeder
SINGAPORE/WASHINGTON, Oct 29 (Reuters) - Asian stock markets
fell on Thursday but not as sharply as Wall Street's rout
overnight, while oil bounced off lows and U.S. futures jumped,
as Asia's brighter economic outlook offset investor worries
about fresh COVID-19 lockdowns in Europe.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell 1%. Japan's Nikkei .N225 fell 0.8% and
drops in Hong Kong .HSI , Sydney .AXJO , Shanghai .SSEC and
Seoul .KS11 were smaller than 1.5%.
That is heavy but much less than the S&P 500 index's 3.5%
drop .SPX or the 4.2% fall by Germany's DAX .GDAXI which led
European shares .STOXX to their lowest level since late May.
S&P 500 futures ESc1 and Dow futures YMc1 rebounded 1%,
which traders attributed to heightened volatility and to the
less gloomy mood around Asia as China's economy builds up steam.
"Asia is not really partaking in this second or third wave
story because it's got its COVID largely under control," said
Rob Carnell, chief economist in Asia at Dutch bank ING.
"As a result, domestic economies look reasonable. Exports
will remain soft...but domestically they are still doing OK and
doing a lot better relative to (Europe and the U.S.)."
Oil rose from a four-month low overnight and the
risk-sensitive Australian and New Zealand dollars rose about a
quarter of a percent. O/R AUD/
Still, both currencies are, for now, headed for a weekly
loss against the dollar and so is the euro, as worries about the
new lockdowns seemed to catch investors by surprise. FRX/
In France, people will be required to stay in their homes
from Friday, except to buy essential goods, seek medical
attention or exercise. Germany will shut bars, restaurants and
theatres from Nov. 2-30. "Until yesterday the market was travelling with the hope the
improvement of health care services in dealing with the pandemic
would prevent the introduction of severe lockdowns," National
Australia Bank FX strategist Rodrigo Catril said in a note.
"At least in Europe, this dynamic has now changed ... the
question now is whether U.S. states will follow."
FUNDAMENTALS
Central bank meetings and economic data are the main focus
later on Thursday, with gathering uncertainty about the U.S.
Nov. 3 election also keeping investors on edge.
The Bank of Japan is set to maintain its massive stimulus
programme and vow to take further action if the virus' economic
fallout threatens a return to deflation. Investors expect the European Central Bank to hold off on
new measures and instead hint at action in December, which is
likely to keep a lid on the euro. The common currency EUR= hit a 10-day low on the dollar
and a hundred-day low on the yen EURJPY= overnight, before
recovering slightly. It last bought $1.1751.
German unemployment and inflation data, European confidence
surveys and advance U.S. GDP figures will also be closely
watched - with the U.S. figure likely to show record growth, but
still leave the economy behind where it began 2020. "Any disappointment in these numbers may have a magnified
market impact, given the current weakness," said CMC Markets'
Sydney-based strategist, Michael McCarthy.
Investors are also increasingly wary of a contested U.S.
election result that could unleash a wave of risk-asset selling.
Wall Street's "fear gauge," the Cboe Volatility Index .VIX
surged on Wednesday to its highest level since June and a jump
in implied currency volatility indicates that a wild ride is
expected. One-week yuan implied volatility CNHSWO= hit a five-year
high on Thursday. CNY/
The U.S. bond market, however, was somnolent as investors
looked past polling day and figured huge government borrowing
for coronavirus relief spending will happen no matter who wins.
Benchmark U.S. 10-year yields US10YT=RR rose overnight and
added about a basis point on Thursday to 0.7894%.
"Looking ahead, heightened volatility in the run-up to the
election and even, potentially, following the election will
eventually subside," said Seema Shah, chief strategist at
Principal Global Investors.
"Markets will soon reassert a trajectory determined by
fundamentals, rather than election news flow."
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Global assets http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets http://tmsnrt.rs/2ihRugV
MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
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