China equities take a hit on geopolitics

US-China row pushes stocks lower

China equities are the region’s worst performers today, following the retreat by Wall Street overnight and rising concerns over the deterioration in US and China relations. The Shanghai Composite, CSI 300 and Hang Seng are all 1.70% lower today.


Wall Street retreat

Wall Street’s leading indices retreated overnight as a weaker jobless number was enough for traders to rush to book profits after a robust week of gains. The S&P 500 fell 1.23%, the Nasdaq fell 2.30%, reflecting the scale of its increases this week and the Dow Jones eased lower by 1.30%. Ex-China, that theme is evident across Asian bourses, which are all lower today.

Australia’s trade-centric and resource-heavy ASX 200 and All Ordinaries are both down 0.90%. The same story is repeating across South East Asia with Singapore, Jakarta and Kuala Lumpur all around 0.80% lower for the day.

The weekend is undoubtedly providing enough potential risk for investors to look to either reduce or hedge it. Progress has been slow on the next US fiscal stimulus package, with the usual Republican-Democrat divide hampering a stimulus package from being finalized. Covid-19 remains a massive concern in the US, and US/China relations appear to be deteriorating at an exponential pace. Concerning the latter, markets appear to be increasingly immune to US/China rhetoric. The underlying belief being that neither will tip into outright trade hostilities and jeopardise the nascent global recovery. Much of the US noise may also be perceived as electioneering.

We expect the weakness to continue into Europe after last night’s jobless claims warning shot and increasing weekend geopolitical risk from Washington DC and China.

With Japan on holiday today, activity in Asia will be somewhat muted. We expect the correction lower in equities and the US dollar to continue as risk is taken off the table ahead of the weekend.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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