Asian down on recession, Covid fears

Asian equities slump on China lockdown fears

US equities endured a torrid session overnight, dropping initially, but then rallying hard as US yields fell across the curve. With markets racing to price in a US recession, the US equity performance was somewhat counterintuitive with the rate-sensitive Nasdaq outperforming. If US yields find a floor after the US data released tonight, Wall Street’s recovery could find itself flagging. The S&P 500 finished 0.16% higher, the Nasdaq stormed to a 1.75% gain, while the value-centric Dow Jones closed 0.42% lower. In Asia, US futures are steady, with the S&P 500 and Dow almost unchanged, while the Nasdaq futures have booked a 0.28% gain.

Asian markets are mostly having a bad day at the office as they race to price in both a US recession overnight and also the potential for wider virus restrictions in China following overnight developments. The prospect of more covid zero restrictions in China is an unwelcome dose of reality for Asia and is certainly carrying more weight, although Asian currency weakness is also in play.

Japan’s Nikkei 225 is 1.20% lower, with South Korea’s Kospi dropping by 1.10%. In mainland China, the Shanghai Composite has slumped by 1.25%, with the CSI 300 close behind, falling by 1.10%. In Hong Kong, the Hang Seng has lost 1.40%.

Across regional Asia, Manila is defying the odds once again, jumping by 1.40% this morning. Elsewhere, it is a sea of red. Singapore is relatively steady, down just 0.05%, while Kuala Lumpur is 0.50% lower, Jakarta has lost 1.05%, Taipei has slumped by 1.75%, and Bangkok has eased by 0.20%. Australian markets have been spared the worst of the selloff, despite resource prices tumbling overnight, thanks to its Wall Street correlation of late. The ASX 200 and All Ordinaries are down by 0.30%.

European equities had a terrible day yesterday thanks to natural gas supply fears and political instability in the UK’s case as well. With the Norwegian government stepping in to impose a settlement between the striking oil workers and employers, European markets may gain a temporary reprieve this afternoon.

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