Asia markets drop ahead of Powell testimony

Asian equities ignore the overnight Wall Street rally

Wall Street rallied broadly overnight, with the three main indexes having banner days as the call of buy-the-dip proved irresistible after a weekend in the Hamptons. The S&P 500 rallied by 2.45%, the Nasdaq leapt 2.51% higher, and the Dow Jones booked a healthy 2.19% gain. Unfortunately, US index futures in Asia are telling a story of fast-money locking in short-term overnight gains as all three head south. S&P 500 and Dow futures have sunk by 0.85%, while Nasdaq futures have fallen by 0.70%.

Rather surprisingly, Asian markets, even the Wall Street-following-slaves in Japan and Australia, have completely ignored the overnight rally, with most of Asia flat to lower. The abrupt about-turn by US futures today could be behind it when combined with a lack of conviction about the overnight rally’s staying power.

Japan’s Nikkei 225 is 0.20% lower today, while the South Korean Kospi has slumped by 2.0%, perhaps over monkeypox fears. Mainland China’s Shanghai Composite is down 0.30%, with the CSI 300 falling by 0.45%. In Hong Kong, the Hang Seng has retreated by 1.30%.

Across regional markets, Singapore has eased 0.40% lower, while Taipei has slumped by 2.0%. It is interesting that the Caligula’s of semi-conductor manufacturing, Taiwan, and South Korea, are the day’s worst performers. Perhaps it is a proxy play for a US and Europe recession? Kuala Lumpur has fallen 0.70%, Jakarta by 0.30%, Bangkok by 0.60%, and Manila by 0.40%. In Australia, the ASX 200 is 0.10% lower, with the All Ordinaries down by 0.20%.

Asia-Pacific markets, ex Taipei and Seoul, appear content to adopt a wait-and-see approach this week, letting the dust settle on the Powell testimony. That caution is likely to finally nip the European equity rally in the bud as well, which has been ignoring the natural gas crisis completely and at its peril. European equities are likely to open lower this after in line with Asia.

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