Equities fall despite low US CPI

Asian equities lower on Wall Street and China

Asia was always set for a tough day at the office after the lower inflation data darkened the recovery mood in the US and sent Wall Street into a negative close. The poor China data set today has confirmed the risk aversion mood and Asian markets are mostly lower today. Thinking about the low US inflation data overnight, ostensibly receding tapering fears as an aftermath should have been positive for equities at the margins. Instead, Wall Street fell, and the US dollar remained firm. That is probably a warning side that the downside is the path of least resistance for the remainder of the week. One wonders if the talk about impending hikes in US corporate tax rates is also permeating US equities.

The S&P 500 fell by 0.57% overnight, while the curse of the Apple product release struck again, with the Nasdaq closing 0.45% lower. The cyclical-orientated Dow Jones suffered the most, slumping 0.82% and is in serious danger of breaching an upward support line going back to the lows of March 2020 and falling through its 100-day moving average. Futures in Asia have risen on all three by around 0.20% though, as short-covering meets low liquidity in Asia.

The rise in US futures appears to have limited the fallout in Asia of the China data, as has the relatively benign negative reaction by mainland exchanges post-the China data. China’s data dump may have also raised expectations of more fiscal stimulus. The Nikkei 225 is 0.50% lower with the Kospi actually climbing into positive territory, now 0.16% in the green.

In China, the Shanghai Composite has fallen by just 0.22%, although the narrower blue-chip Shanghai 50 is down by 0.90%. The CSI 300 has fallen by 0.35%. China’s latest target, Macau’s casinos, saw the Hang Seng slump initially, the Hang Seng tumbling by 1.50% in a perfect storm of gaming chips and China data today.

Singapore is 0.65% lower with Kuala Lumpur falling by 0.25% and Taipei by 0.35%. Bangkok is flat while Jakarta is bucking the trend after Indonesia’s trade data today showed massive recoveries in exports and imports and a larger trade surplus. That has sent the Jakarta Composite higher by 1.50%. Australian markets are tracking Wall Street and Asia, the ASX 200 falling by 0.35%, while the All Ordinaries is 0.25% lower.

Europe will struggle to shake of the US and China data reactions today and I expect markets there to open slightly lower. Wall Street is likely to get another dosh of growth wobbles tonight after China’s Retail Sales missed so badly today.

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