Mounting risks send Asia lower

Asian stock markets follow Wall Street south

A post-OPEC+ spike in oil prices, US fiscal fears, notably the debt ceiling, US political infighting, growth fears, inflation fears, rate fears; take your pick overnight as it sent Wall Street plummeting. Technology giants, in particular, took a beating, justified by their sensitivity to potentially higher US interest rates resulting from a Fed taper or a US government debt default. I am more in the camp that the introduction of more two-way pricing risks is a new reality for most investors after a rampant 18-month bull market pumped up unlimited free central bank money.

Whatever it was shaking Wall Street, the session was ugly with the S&P 500 tumbling by 1.30%, the tech-heavy Nasdaq slumping by 2.14%, and the Dow Jones falling a comparatively modest 0.93%. Some short-covering has lifted Nasdaq futures 0.25% higher in Asia, suggesting a lot of the selling overnight was fast-money speculators, while S&P and Dow futures remain unchanged.

The negative sentiment has spilled into Asia, especially Japan, whose stocks had been on an equally fiscal-stimulus-is-coming speculative bull market of late. The Nikkei 225 has been pummelled, falling by 2.40% today, while the South Korean Kospi is 1.70% lower. Mainland China markets are closed but the Hang Seng is showing surprising resilience, being only 0.05% lower. Hopes that more Evergrande asset sales are in the offing could be lifting sentiment temporarily there.

Regionally, Singapore has fallen by 0.90% with Taipei surprisingly, climbing 0.10% and Kuala Lumpur by 0.20%, likely supported by rising oil prices. Jakarta is 0.30% lower with Bangkok down 0.15% and Manila by 0.35%. Australian markets are lower also ahead of the RBA policy decision, the ASX 200 and All Ordinaries down 0.45% and 0.85% respectively.

As ever, the Asian markets subject to the most speculative zeal and with more tech-heavy makeups have taken the biggest hits today. The more resource and growth-centric ASEAN markets being relatively sheltered by comparison.

I am expecting global stock markets to wildly chase their tails this week, lost on the noise and swings of market sentiment until, hopefully, the US Non-Farm Payrolls restores some directional order on Friday. The game of blink surrounding the mid-month debt ceiling legislation deadline is introducing a heightened uncertainty. Although if a cliff is driven off, the Fed will surely be there to open the spigots once again, never bad for stock markets. I’m not sure when both major parties in the US decided their job was to deliberately sabotage each other’s efforts on every level, instead of being reasoned opponents, but there we have it.

I’ve called it before and been wrong each time, but the charts on the S&P 500, Nasdaq and Dow Jones have all made multi-day breakdown below their support lines that data back to March 2020. That doesn’t mean we are facing Armageddon, even 10-15% falls still leave all three in longer-term bull markets. And some two-way price action is long overdue, if only to remove the cancer of the meme stock. The breaks lower could well be false, and I for would prefer to see some weekly closes below the 200-day moving averages before really calling for deeper corrections. We are not there yet.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.