Asian equity markets are sluggish

Wall Street shines, but Asia cautious

Asia is reluctant to fully buy into the surge seen on Wall Street overnight, as the S&P 500 rose 1.40%, the Nasdaq jumped 2.13%, and the Dow Jones rose 1.03%. Only Japan and South Korea have leapt aboard the Wall Street rally, the Nikkei 225 climbing 1.0% and the Kospi rising 0.80%.

Perhaps with one eye on the upcoming US and China trade deal meeting, Mainland stocks markets are quiet, with both the Shanghai Composite and CSI 300 flat for the session. Both indices are lying in the exact middle of their 6-week ranges. After rallying initially on encouraging statements from Tencent, Hong Kong’s Hang Seng has eased by 0.70%, having failed to test its 200-day moving average (DMA) at 25,660.

Regionally, Singapore has climbed 1.30% today, with Kuala Lumpur 0.85% higher. Weak earnings data from Australia, though, see the ASX 200 down 0.90%, and the All Ordinaries falling 0.60%. New Zealand has recovered some of yesterday’s losses, rising 0.30%.

The inflationistas should probably get back in their boxes for now. The overnight continuation of the buy-everything trade was due to a sigh of relief that the US isn’t facing deflationary pressures, and not because a quantitative easing-led, hyperinflation rider of the apocalypse appearing on the horizon. The US Treasury sold $38 billion of 10-year notes overnight with a strong bid-to-cover ratio. If inflation were really an issue, that would not have happened. Still, the fact that the US is not heading down the Japanification Road, is as good a reason to buy anything that moves as any.

The mixed picture in Asia appears to be reflecting an emphasis on regional issues, as opposed to universally slavishly following Wall Street. Asian investors may well be placing more emphasis on the importance of the US weekly employment data, then the overnight inflation data. Europe, though, I would expect to open higher following Wall Street’s strong performance overnight.

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