US yields send Asian equities lower

Equities bloodbath continues in Asia

The 17-basis point rise in US 10-year yields overnight, and a close over the magical 1.50% market, was enough to send Wall Street into a spiral dive. The S&P 500 fell 2.45%, while the tech-heavy Nasdaq suffered a severe bout of global recovery, work from home-itis. It plummeted by 3.50% by the day’s end. The Dow Jones found not cyclical recovery solace either, finishing 1.75% lower.

With Wall Street setting the myopic inflation-watching tone, it is no surprise that Asia has followed suit and headed directly to jail without passing go. The Nikkei 225 has fallen 2.80%, with the Kospi down 3.0%. China’s Shanghai Composite and CSI 300 are 1.90% lower, with the Hang Seng falling 2.50%.

Singapore is down 1.0% ahead of Industrial Production data that is expected to be positive. Kuala Lumpur is down just 0.20%, with Jakarta down 0.70%. The overnight fall in commodities, and the rise in government bond yields has seen Australian markets retreat. The ASX 200 and All Ordinaries are falling 2.0% today.

The more cyclical ASEAN markets have escaped the worst of the carnage, that being reserved for the more technology and high-end manufacturing markets of North Asia. Nevertheless, there is no escape from the jaws of the US yield curve, and I expect equities to remain under pressure when Europe arrives. Robust US PCE data this evening, and weak China and Asia PMI’s on Monday will see the equity sell-off gather pace next week, as markets correct 10-months of buying everything.

On a technical note, both the S&P 500 and Nasdaq are seeing ominous developments. The S&P 500 is closing in on its March 2020 lows support line, at 3775.00 today. The picture is even more dire for the Nasdaq. It has spent this week gyrating just below its March 2020 lows support line, today at 13,200.00. It is now well below that level and is threatening its 100-day moving average at 12,572.00. A weekly close below 13,200.00 is a very negative technical development indeed.

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