Softness on Wall Street carries into Asia
Equity markets are in general retreat in Asia this morning, following a soft session on Wall Street. An impending wave of US bond issuance and higher PPI data saw US yields rise overnight, spooking stock markets. In the bigger picture, the double top at 11,220 on the Nasdaq, and the failure of the S&P 500 ahead of 3,400.00, are both causes for concern.
Those same concerns are being reflected in Asia, with US CPI data to come this evening. The headline figure is projected to drop from 0.6% to 0.3%, while the core reading is expected to stay unchanged at 0.2%. The Nikkei 225 is the region’s outperformer, up just 0.15% thus far. The Kospi has fallen 0.25%, with mainland China’s Shanghai Composite and CSI 300 both down 0.90%. The Hang Seng has declined by 0.60%.
Regionally, Singapore and Kuala Lumpur are both down 0.60%, while in Australia, the ASX 200 and All Ordinaries have fallen 0.45%. The return of Covid-19 to New Zealand has seen the NZX fall 1.30% today and marks it out as the region’s most vulnerable market this week. New Zealand has managed to control Covid-19 quite well until now, but the lockdown of all nursing homes nationwide is raising alarm bells.
Technical indicators suggest that the US dollar continues to trace out a short-term bottom, notably against major currencies. The same applies to stock markets around the world, notably Australia, Japan and the United States. The S&P 500 failing ahead of 3400 overnight, a level that proved impenetrable in February.
Although the underlying drivers of the great bull market since mid-March remain intact, the technical picture across the world shows major stock markets showing topping patterns or failing at key resistance levels. A rise in US yields could be the catalyst for a long-overdue flushing out of excessive long positioning that has characterised the past few months. That will be no bad thing in the longer-term.