China Stocks Drag Asia Lower

Stocks edge lower in Asia

Stock markets in Asia are generally lower today after Wall Street gave up its gains after California aggressively rolled back its economic reopening measures. With China’s headline trade data outperforming, though, the fallout has been limited.

In Japan, the Nikkei 225 is down 1.0% with officials hinting that an emergency Covid-19 declaration is closer. The Kospi has edged lower by 0.50%.

China markets have had a volatile morning, with technology and financial stocks pushing the mainboards sharply lower initially. The trade data has stopped the rot for now, but the Shanghai Composite is still 1.22% lower, with the CSI 300 1.25% lower. Hong Kong was led lower by Ali Baba after news hit that Jack Ma had sold around USD 10 bio of stock. The Hang Seng index is lower by 1.70%.

Elon will hate me for saying this, but Tesla’s 40% rally over the past two weeks is making me very nervous. Partly this may have been driven (sic) by Tesla’s being a hair’s breath away from admission to the S&P 500 index. Another quarterly profit announcement is likely to seal the deal. I’ll not argue the merits of the Tesla product or business model; instead, a 35% rise in share price since June 26th suggests the FOMO-herd may be nearing the cliff’s edge. If something is too good to be true, it usually is. Before you all start yelling, I am especially noting the compressed timeframe and the scale of the rally.

In Australia, stock markets are weighed down by last night’s Wall Street retreat and rising geopolitical tensions. The ASX 200 and All Ordinaries are both 0.80% lower.

The Nasdaq traced out a bearish outside reversal day overnight, after initially rising ahead of the California news. The Nasdaq ended the session down 2.13%, with the S&P 500 falling 0.93% and the Dow Jones emerging relatively unscathed, flat on the day. Big-tech led the sell-off and should that pattern continue this evening; it would be an ominous warning sign that a long-awaited downside correction for equity markets may be upon us. Key support levels for the Nasdaq are 10518.00 and 10400.00. On the S&P 500, support is at 3100.00.

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