Asian equities rotate cyclically

Nasdaq crushed as US yields climb sharply

The rise in inflation, fears and the resulting spike in US bond yields, returned overnight after a brief hiatus, crushing the previous day’s rally on Wall Street, notably in the tech space. The Nasdaq plummeted by 3.02%, the more mixed S&P 500 fell 1.48%, while the cyclical-heavy Dow Jones retreated by only 0.42%. The playbook remains very clear now; a rise in the US yields sparks a rapid retreat from global indices heavy in 2020 darlings. With that money moving into cyclical-recovery-heavy markets, inflation being a function of the global economic recovery.

On the geopolitical front, Asian markets can expect no relief from the US-China meeting in Alaska on Thursday. The talks got off to a rocky start and in a nutshell, China isn’t happy, so business as usual. Any improved trade premium has vanished from mainland China stock markets today, as an improvement in relations between the two superpowers looks as distant as ever.

US futures are holding steady in Asia, but regional markets are mostly lower to varying degrees. The Nikkei 225 and Kospi are down just 0.90%, but China markets are having a torrid day. The Shanghai Composite and CSI 300 have plummeted by 1.70%, with Hong Kong falling 1.60%. Taiwan is also 1.60% lower, but the fallout in more cyclical ASEAN markets is more limited.

Singapore has edged higher by 0.20%, continuing its recent outperformance. Kuala Lumpur has fallen just 0.25%, with Bangkok down 0.50% and Jakarta only 0.20% lower. In Australia, the ASX 200 and All Ordinaries are also holding their own, down just 0.45%.

With commodities ex-oil holding up despite a stronger US dollar and steeper yield curves positive for banking sector profitability, ASEAN and Australian markets, to a lesser extent, should continue to outperform, their markets being heavy in both sectors with a high beta to the recovery in the real economy. With markets highly susceptible to large scale retail flows and dominated by technology behemoths, North Asian markets remain more vulnerable.

Content 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 Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.