Asian stock markets in consolidation mode

Equities are trading sideways in the Asia-Pacific region

US equity markets continue to show movement in both directions, but we are not seeing this trend in the Asian markets in Thursday trade. Equity markets across the region showed solidity yesterday, refusing to bow to the schizophrenic noise from Wall Street. With the former having taken its medications and returned to the buy-everything trade overnight, it’s probably no surprise that Asia has not fully bought into that move either. Big tech dragged US markets higher overnight, the Nasdaq rising 1.44% with the S&P 500 and Dow Jones both rising around 0.70%.

Today, even China mainland markets appear to be in consolidation mode, after gains of over 10.0% over the past week. Data showing stock margin lending rapidly increasing, maybe adding a cautionary note. It is important to remember that fast-money retail investors dominate mainland stock markets. The Shanghai Composite and CSI 300 are both just shy of unchanged this morning. On the inflation front, Chinese numbers in June were within expectations. Consumer inflation ticked higher to 2.5%, up from 2.4% beforehand. The Producers Price Index continues to head lower. The index fell by 3.0%, marking a fifth successive decline. Which direction is inflation headed in China? The Chinese central bank is projecting steady inflation of around 3% for the year, but some analysts argue that we could see deflation grip the world’s number two economy.

Elsewhere the Nikkei has crept 0.40% higher with the Kospi climbing 0.60%. The Hang Seng is just 0.20% higher while Singapore stocks have fallen modestly ahead of the election and public holiday tomorrow. The Straits Times is falling 0.40%. Australian stocks have shrugged off China fears, the ASX 200 and All Ordinaries rallying 1.0% today. Geopolitics though threatens to cast an increasingly dark shadow.

Overall, Asian markets look content to remain in consolidation mode today, particularly on the China mainland. Headlines will dominate short-term movements, with the region preferring to wait for confirmation that Tuesday’s retreat on Wall Street was a one-hit-wonder.

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