Asian equities do not pass go

Asian markets in negative territory

Wall Street endured a soft session as the US earnings outperformance hit a wall of declining marginal utility. I suspect that that rise in short-dated yields in the US, the circus on Capitol Hill, and the impending FOMC meeting are sapping the momentum of the earnings trade. The S&P 500 fell by 0.51% while the Nasdaq held unchanged, and the Dow Jones slipped by 0.74%. In Asia, futures on all three are around 0.15% higher on fast-money short-covering.

Asian equity markets are ignoring the tiny bounce in US index futures though and have headed directly south. The Nikkei 225 has fallen by 0.95% in sympathy with Wall Street, with downgrade BOJ projections weighing on sentiment, along with this weekend’s election. The Kospi is barely treading water at unchanged, thanks to the impressive Samsung result. Mainland China was likely to open lower anyway, but the noise over coal and profiteering from the state planner has eroded sentiment further. The Shanghai Composite is 0.95% lower while the CSI 300 has fallen 0.40%. In Hong Kong, the Hang Seng is 0.25% lower thanks to several buy recommendations on mainland tech heavyweights overnight.

Singapore has eased by 0.35% as Covid-19 cases hit new daily highs, while Kuala Lumpur has fallen 0.55% as oil takes a bath this morning. Taipei is unchanged as tech-centric markets appear to be weathering the storm slightly better, while Jakarta is down by 0.70%, Manila by 0.90%, and Bangkok by 0.20%.

Australian markets have taken fright at the jump in 3-year CGB yields, as well as the China ambassador apparently leaving Australia. The retreat in resource prices will also be jarring nerves down under. The All Ordinaries and ASX 200 have fallen by 0.45% today.

European stocks are unlikely to find solace in the price action on Wall Street and Asia and will adopt a defensive posture ahead of this afternoon’s ECB meeting. With inflation nerves seemingly overcoming the US earnings trade, at last, Wall Street will be on tenterhooks for this evening’s PCE Prices, Advance GDP, and Jobless Claims. I doubt that even outstanding results from Apple and Amazon will be enough to lift the cautionary mood other than temporarily.

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