Asia can’t shake off inflation nerves
The rotation play continued to play out overnight on Wall Street quietly. The S&P 500 was unchanged, but the NASDAQ retreated by 0.58% while the more cyclical-heavy Dow Jones rose by 0.29%. Movements in the energy and commodity space explain much of the Dow Jones versus NASDAQ price action direction and why the more balanced S&P 500 was unchanged. The impressive US Retail Sales numbers, which saw a jump of 5.3% for January, appear to have been shrugged off by markets as a stimulus-driven one-off.
The grind higher in energy and commodities are weighing on Asian markets, which are perpetually hungry and beholden to both. Mainland China returned to the office today, but the initial rallies by the Shanghai Composite, and notably the CSI 300, were quickly reversed. The Shanghai Composite is now 0.55% lower, with the CSI 300 suffering a 3.0% round trip in fortunes, currently 0.85% lower for the session. The CSI 300 was dragged down by the Shenzhen components, which are enduring a dismal day at the office.
Hong Kong tells much the same story, and tentative rally, followed by a fall from grace, now 1.50% lower for the day.
Elsewhere in Asia, the Nikkei 225 has fallen 0.25%, while the Kospi is 1.0% lower. Singapore is down 0.50% with Kuala Lumpur down 0.25% while Jakarta has bucked the trend on rate cut hopes today, rising 0.45%. Australian markets are caught between an unimpressive Wall Street session and higher commodity prices. That has left the All Ordinaries and ASX 200 almost unchanged for the day.
US index futures are in negative territory, notably the NASDAQ futures, which are down 0.50 per cent. Europe, which is another considerable energy and commodity importer, is likely to follow Asia’s lead and track lower this afternoon. At this stage, though, the price action looks corrective still, with equity markets going through a cost-push inflation repricing exercise.