Asian equities follow Wall Street south

Wall Street returned from a long weekend in a belligerent mood overnight, sending stocks sharply lower. The S&P 500 fell 2.78%, the Nasdaq fell by 4.11%, and the Dow Jones fell 2.25%. Having led the rally from mid-March, big tech stocks were singled out for attention, leading the move lower overnight. With the democratisation of stock trading by online brokers, we should expect the higher participation by retail investors to lead to more incidences of herd-like volatility, just look at China where retail dominated flows.

The scale of the rally since mid-March means that at some stage a meaningful correction would, and could, occur. The price action of the past few sessions suggests that this could be that time. However, the search for yield remains in a zero per cent world, and I suspect the FOMO herd could change direction just quickly as it began. Key support levels are the 100-day moving averages (DMA) on the Nasdaq at 10,300.00, 3160.00 on the S&P 500, and 26,170.00 for the Dow Jones. All are somewhat distant still and only daily closes below them will call for a reassessment.

Asian stock markets are all lower today, but not by the same degree as the Wall Street sell-off. That trend has also been evident in recent times when Wall Street has rallied, Asia refusing to follow tick-for-tick slavishly. That suggests some resilience in Asian markets despite regional markets being in the red today. The injuries thus far look minor and not season-ending.

The Nikkei 225 has fallen 1.65%, with the Kospi down 1.0%. The Shanghai Composite has declined 1.60% and the CSI 300 by 1.30%. The Hang Seng is 1.70% lower with the Straits Times down only 0.50%. The more closely US-aligned Australian markets are lower by around 2.0%.

With no tier-1 data due in the US tonight, equity markets will be at the mercy of the whims of intra-day sentiment and headline bombs. Asia will remain on the back foot today, with Europe sure to follow suit as we await a turn in sentiment, or not, from Wall Street this evening.

This article 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 Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is 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, Channel News Asia as well as in leading print publications including 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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