Equity markets retreat in Asia

Asian markets lower as caution is the word

Wall Street was marked by a mixed session overnight. The S&P 500 was almost unchanged, while the Nasdaq got an Apple VR boost, rising 0.55%. The Dow Jones suffered big-oil executive order fatigue, finishing 0.04% lower. The bickering between the Senate leaders hitting the wires this morning has sent US index futures sharply lower, however, with Dow futures down 0.50% and S&P and Nasdaq futures falling 0.40%. With the Senate split on a 50-50 basis, it is not a major surprise that we are seeing fault lines begin to emerge along party lines, with possible fireworks not too far away.

That has been enough to send investors in Asia to the sidelines. In addition, some negative developments in China are adding to the cautious tone ahead of the weekend. Hong Kong has announced a complete lockdown of part of Kowloon this morning, in an effort to contain Covid-19. Investors are concerned over the Alibaba rally, which appears to have fizzled, with Ant Financial’s value rapidly being recalculated downwards as the Chinese government tightens the screws on its parent company. This has weighed on the China equity markets – Shanghai Composite has declined 0.75%, and the CSI 300 is down 0.30%. The worst performer has been the Hang Seng, which has been pummelled by 1.40%.

The Nikkei 225 has fallen 0.50%, with the Kospi unwinding early gains to be just 0.20% higher. Singapore has fallen by 0.75% although Kuala Lumpur has recovered some of its Bank Negara losses, rising by 0.40%. Manila is 1.25% lower and Jakarta and Bangkok have fallen 0.40% while Taipei is 0.75% lower. Australian markets have also seen some profit-taking with Google’s threat to withdraw its search functions from Australia having no noticeable impact. The All Ordinaries and ASX are both down 0.40%.

The price action this morning looks corrective and cautionary, and not a structural turn in sentiment. The risks are rising that the US Senate will not be the peace, love and beads that financial markets have been aggressively pricing in this week. Any further signs of widening fractures could be the precursor to a downward correction by equity markets globally next week.

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