Asia follows Wall Street south

Hawkish FOMC minutes send equity markets lower

Wall Street had a torrid session as a hawk FOMC minutes highlighted the amount of post-omicron speculative longs positions that were out there. Technology came in for particular attention, the Nasdaq suffering its biggest one-day drop in nearly a year. The S&P 500 tumbled 1.94% lower, with the Nasdaq in full retreat, falling by 3.34%. By comparison, the value-centric Dow Jones fell by only 1.05%. US yields ground higher once again overnight, pressuring highly valued technology stocks. In Asia, the story is repeating in the futures market. Nasdaq futures are 0.70% lower, the S&P 500 futures are down 0.40%, and the Dow Jones futures are 0.25% lower.

Asian markets initially held their nerve this morning, but with no short-covering in the US futures, the opposite happening, in fact, Asia’s sell-off quickly accelerated leaving the region sea of red. The Nikkei 225, highly correlated to the Nasdaq these days, have tumbled 2.86% lower. The Kospi has fallen 0.75% with neither Tokyo nor Seoul showing any additional reaction to a hypersonic missile test by North Korea today.

Mainland China sees more virus restrictions being put in place including flights, but the Shanghai Composite is only 0.15% lower. I suspect China’s “national team,” is in “smoothing. The CSI 300, however, home to a much more diverse set of companies than giant SOE’s, has fallen by 0.85%, while the Hang Seng is holding up quite well, down only 0.35%, led by gains by Alibaba and JD.com.

Singapore is also bucking the trend, the Straits Times rising by 0.50%, led by its three mega-banks and consumer discretionary. Taipei has retreated 1.20%, with Jakarta down 0.80% and Kuala Lumpur down by 0.90%. Bangkok is 1.40% lower with Manila falling 0.65%.

Australian markets, facing tighter restrictions once again under a crushing omicron caseload, and with a high beta to US markets, have suffered heavily today. Both the ASX 200 and All Ordinaries have fallen by 3.0% today.

Europe is unlikely to shrug off the negativity that has swept the US and flowed so pointedly into Asia today. Europe will open lower as will London, but I won’t rule out the buy-the-dip gnomes of Wall Street seizing their chance and turning things around on Wall Street this afternoon.

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