Asian equities bounce

Asian equity markets jump on dovish Fed

Asian markets have jumped on the FOMO headless chicken global recovery trade, Wall Street rebounding with vigour today. Nowhere more so than yesterday’s biggest losers, Japan and Australia, who have more headless chickens than most in the region.

A dovish Jerome Powell lifted Wall Street from its taper malaise. In prepared congressional testimony, Powell said that inflation, which has hit a 13-year high, remains transitory. The markets reacted favourably to Powell’s comments as well as a dovish comment from Fed President Williams, to swamp pseudo hawkish comments from Fed Presidents Bullard and Kaplan.

The S&P responded by jumping by 1.40%, the Dow Jones pole vaulting 1.76% higher, and the Nasdaq rising a relatively pedestrian 0.79%. Futures on all three indices have tracked around 0.20% higher this morning.

Having slumped yesterday as panicked short-term traders rushed for the exit, the Nikkei 225 has leapt 3.30% higher today, unwinding most of those losses. Similarly, the herd has reversed course in Australia, with the All Ordinaries climbing by 1.50%, and the ASX 200 rallying by 1.60%. The South Korean Kospi, meanwhile, has moved 0.70% higher.

In China, the government continues to make noises about pushing commodity prices lower. Today, iron ore futures have slumped, which has helped the Shanghai Composite move 0.65%, while the more tech-heavy CSI 300 is up 0.40%. Perhaps with one eye on China’s clampdowns for the opposite reasons, Hong Kong is unchanged today. Across regional Asia, Singapore has eased by 0.35%, while Kuala Lumpur has climbed 0.15%, Jakarta by 1.0% and Taipei by 0.50%.

With a light data calendar globally this week, the equity market narrative will continue to flip flop to the whims of Wall Street. Headlines and Fed speakers are likely to dominate proceedings, and investors should be prepared for the volatility to continue.

The headless chicken volatility is exacerbated by this week being exceptionally light on tier-1 data. US Personal Consumption, Durable Goods or Initial Jobless Claims could see the global reflation trade unwind start once more. Or maybe not. You can cut the cake whichever way you want if you are a headless chicken these days.

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