Multiple headwinds soften Asian stocks

Asian markets follow Wall Street and edge lower

Asian markets after mostly lower today as US-Sino relations, mixed US data, and a rampaging delta-variant across the region all combine to weigh on sentiment into the weekend. Wall Street closed lower overnight, led by technology, as bullish momentum faded against a background of regulatory noise and Capitol Hill legislative confusion.

Notably, US long-dated yields continued to retreat on a firm transitory message from Mr Powell and Ms Yellen; Wall Street could not rally, despite a procession of decent earnings results. That suggests that markets will be vulnerable tonight to a weak US Retail Sales print as investors cast an eye to an increasingly cloudy third quarter.

The S&P 500 fell 0.33% while the Nasdaq lost 0.70%, with the Dow Jones recording a modest 0.15% gain on rotational flows out of tech. Futures on all three indexes are slightly negative in Asia. A GDP downgrade by the Bank of Japan, and Covid-19 cases sees the Nikkei’s late-week retreat continue, falling 0.80% today. The Kospi has fallen by 0.60%, with Taipei falling by 0.75%.

China’s new requirements on property developer debt disclosures, and more warnings from the US on doing business with China overnight, have sent markets lower. The Shanghai Composite has fallen by 0.10%, with the CSI 300 falling 0.50%. President Biden’s comments on Hong Kong’s judiciary independence see the Hang Seng lower by 0.30%.

The downgrade of regional growth prospects by Goldman Sachs is weighing on other markets as well. Singapore’s Non-Oil Export data has kept the STI slightly in the green, up 0.10%, but Kuala Lumpur and Bangkok are down 0.30%, Manila is down 0.80% after the delta variant was detected there today, while Jakarta has edged 0.20% higher. In Australia, spreading inter-state virus lockdowns is muting the sentiment from another impressive set of data releases this week. The All Ordinaries and ASX 200 being barely changed.

European stocks are likely to open modestly lower ahead of Eurozone inflation data, with Europe not showing much connection with Asian markets at the moment. Assuming no upward surprises from the Eurozone inflation, an oxymoron if ever there was one, equity markets on both sides of the Atlantic will remain focused on US Retail Sales this evening.

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