Asian markets calm but vulnerable

Asian equities remain fragile as oil rises today

Overnight, Wall Street endured a torrid session as it played catch-up to the sell-off seen in Asia earlier in the day. Fears over the surge in commodity prices torpedoing world growth, and profits, continue to weigh on equity markets, which came into 2022 at juicy valuations, thanks to two years of central bank largesse. Not helping the situation was the fact that US yields reversed some of their Friday losses, rising in New York.

The S&P 500 finished 2.95% lower, the Nasdaq tumbled by 3.62%, and the Dow Jones retreated by 2.37%. In Asia, futures on all three staged a mini relief rally, but momentum has waned, leaving them unchanged. Asian markets are lower once again today, with oil prices rising once again this morning, and the rallies in base metal prices overnight fraying nerves in the region; it being a huge net importer of both. Reports of a Russian general being killed and threats by Russia to cut off European gas supplies are also weighing on sentiment.

Unsurprisingly, given the rise in industrial metal prices overnight, China markets have borne the brunt of the selling today. The Shanghai Composite is down 2.0%, with the CSI 300 falling by 1.70%. By contrast, Hong Kong is lower by just 0.30%, reflecting the price action in Asia ex-China today.

In Japan, the Nikkei 225 is 0.95% lower, with South Korea’s Kospi down 0.50%. Taipei is sharply lower, losing 2.0% today ahead of trade and inflation data later in the session. Singapore has fallen by 0.80%, with Kuala Lumpur losing 1.20%, Manila falling 2.0%, and Bangkok is 0.40% in the red. Jakarta is bucking the trend, rising 0.35% today. Australian markets are also slightly lower, comparatively, the AS 200 and All Ordinaries falling by 0.60%.

Europe is likely to open in the red once again, although a clear signal from the bloc that they have no intention of banning Russian energy exports may provide some temporary relief. That said, if Russia goes through with its threats to cut gas exports, we will be back to square one. European markets remain entirely at the mercy of Ukraine-related headlines.

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