Early equity rallies ease in Asia

Asia shrugs after Wall Street shows strong gains

The Nasdaq’s 3.70% rally overnight set the scene for a strong bounce by North Asian markets this morning, heavy in fellow 2020 darling stocks. The cyclical rotation trade was very much in evidence on Wall Street, with the S&P 500 leaping by 1.41%, while the Dow Jones could only rise by 0.09%.

Early advances in North Asia, notably mainland China, have quickly run out of steam, though, after state-associated investment funds bought heavily yesterday to “steady the ship”. Notably, the futures on all three major US indexes have rolled into negative territory, with Nasdaq futures 0.40% lower.

The loss of momentum so early in the Asian session again reinforces the premise that the main attractions are yet to come from the US bond auctions. Nevertheless, the Nikkei 225 is up slightly by 0.10%. Mainland China’s Shanghai Composite has risen 0.35%, with the more tech-heavy CSI 300 higher by 0.75%. Both, however, have given back much of their early gains. Markets will be on the lookout for more state intervention if they slip into negative territory.

The Kospi is now just 0.20% higher, while Hong Kong is up 0,35%, and Taipei by 0.30%. Singapore has been an outstanding cyclical recovery play this week, but has succumbed to profit-taking this morning, falling by 0.80%. Kuala Lumpur and Jakarta are holding in positive territory, though, both 0.70% higher this morning.

Australian markets have given up their early gains in an ominous sign for the “markets are comfortable with inflation” trade. Both the ASX 200 and All Ordinaries are now 0.30% lower.

Europe, heavy in Dow Jones-like cyclical pre-2020 companies, was a strong outperformer overnight. It is likely to find friends again today now that the tech-recovery momentum is quickly waning in Asia. Today’s price action signals that all eyes are on the US CPI data and the US bond auction tonight. If the Nasdaq’s overnight rally looked more grasping at straws than finding its feet, the risks are definitely weighted towards its retreat resuming this evening.

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