Asian equities tread water

Asian markets edge higher

Given the scale of the rise in headline inflation from the US overnight, US equities were remarkably resilient, perhaps helped by core inflation easing slightly. Wall Street finished lower, but on another week, if we had seen data like that from the US, Wall Street would have been rushing for the exit door. The resilience of Wall Street implies that US equities markets could be set for a bear market rally, especially if the US yield curve continues to move lower and the inversion deepens. Longer-term, none of what I have outlined above will be a constructive environment for equity markets. US earnings season gets underway properly today as well, with JP Morgan and Morgan Stanley announcing. Investment banking revenue will have fallen, but more interesting will be their economic outlook for the rest of the year.

Overnight, and post-CPI, Wall Street fell, with the S&P 500 closing 0.45% lower. The Nasdaq was impressively solid, falling just 0.15%, while the value-centric Dow Jones underperformed, falling by 0.67%. In Asia, US futures are holding steady. S&P 500 and Dow futures are unchanged, while Nasdaq futures have gained 0.25%.

A lack of panic from Wall Street sees Asia stock markets treading water today, erring from unchanged to modestly higher. The Nikkei 225 has risen by 0.75% today, boosted by a weaker yen overnight and falling oil prices this week. South Korea’s Kospi has edged 0.10% higher. Impressive trade data yesterday continues to lift China markets. The Shanghai Composite is 0.30% higher, with the CSI 300 rising by 0.50% and the Hang Seng gaining 0.30%.

In regional markets, Singapore is 0.70% lower after the MAS unexpectedly tightened monetary policy today. Taipei has jumped 0.80% higher, with Kuala Lumpur adding 0.15%, and Jakarta rising by 0.30%. Bangkok is unchanged, but Manila has tumbled by 1.30% after the BSP weighed in with their own rate hike this morning. Australian markets are higher today on impressive employment data, the ASX 200 gaining 0.40%, and the All Ordinaries rallying by 0.60%.

Europe had another torrid day as energy concerns persisted as the Eurozone wilts under a heat wave. Progress in the Ukraine/Russia agricultural export negotiations may give Europe more hopes that Russia won’t switch off the gas from the 21^st of July. As such and given the performance of Asia and US markets overnight, I expect Europe to post a positive opening this afternoon.

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