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Asian equities follow Wall Street south

US bond tantrum sends equities reeling

A not dovish enough Jerome Powell overnight saw the bond tantrum return, throwing more gloom on an already wobbling equity market. The S&P 500 by 1.34%, the tech-heavy Nasdaq plunged by 2.11%, and the previously steady Dow Jones retreated by 1.11%. US index futures continue lower in Asia, down by between 0.35% and 0.50%.

The picture is a little more mixed in Asia, but still mostly negative. The Nikkei 225 has fallen by 1.50%, with the Kospi down 0.85%. In China, though, markets have reversed an initial selloff and are now in the green. The Shanghai Composite and CSI 300 are both 0.10% higher now, although the Hang Seng is down 1.05%. The China outperformance can be laid at the National People’s Congress door, which has stated it wishes to explore joining the RCEP and deepen trade with South Korea, an important economic player in the region. It is also expected to announce massive investments to become more technology-independent.

Elsewhere in Asia, equity markets remain on the back foot. Taipei has fallen 0.30%, with Singapore and Jakarta down 0.10%, while Kuala Lumpur has climbed after oil prices rocketed higher overnight. Bangkok and Manilla are 0.25% lower. ASEAN markets have recouped early losses on the China RCEP news. Australia’s high beta to Wall Street means that the ASX 200 and All Ordinaries are 1.0% lower today.

With Asia catching a China RCEP tailwind, the fallout has been limited from the sharp falls on Wall Street. It is likely to be a temporary stay of execution, though, and the RCEP glow will quickly fade into next week, especially if US Non-Farm Payrolls tonight provoke another spike in US bond yields.

As I noted yesterday, numerous major indices in North America, Australia and Asia have staged downside breakouts. The downside correction potentially has some way to go, and rallies will be sold into the end of the week.

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 [4]

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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