Ants in the pants

Asian markets seeing red

Asian equity markets are starting the week on a sour note after a negative close on Wall Street. Typhoon Chanthu is bearing down on Shanghai, forcing the closure of schools, ports and flight cancellations and may mute activity on mainland markets today. Grabbing attention, though, is a Financial Times story stating that China’s government intends to break up Alipay, owned by Ant Group. Shares in Alibaba Group Holdings, listing in Hong Kong, have opened substantially lower, taking the Hang Seng with them. As I said last week, buying the dip in China equities in this environment remains akin to catching a very sharp falling knife.

Cryptos have edged lower today, following South Korea’s Financial Services Commission announcing a September 24th deadline for local and foreign crypto exchanges to register as local legal entities. The process involves partnering with a local bank, which, unsurprisingly, are reluctant to do so. The intention has been out there for a while, but a hard deadline announcement seems to have delivered a reality bites moment. Bitcoin is down 2.15% as I write, and the technical picture is starting to look concerning. A daily close under USD 45,000.00 targets a fall to USD 35,000.00. Before the perpetual mega-bull haters start, a close above USD 46,500.00 invalidates the formation.

The week’s data calendar is a bit thin globally, meaning we are probably destined for another choppy week of gyrations based on the intra-day themes of the day. Today’s theme suddenly appears to be inflation once again, with yet another Fed President talking tapers sooner rather than later. Nobody cared last week when talk like this emerged, but it’s a slow news day today, and the low attention span FOMO gnomes need “something” to concentrate on.

India releases WPI Inflation later this evening, which should show inflation hovering near its 6.0% target. But it is “big” Wednesday that looms as Asia’s highlight. It features Japan’s Balance of Trade and China’s Industrial Production, Retail Sales and Fixed Asset Inflation. India releases its Trade Balance and Indonesia its Trade Balance and Consumer Confidence. China’s data will obviously be under the brightest spotlight, with nerves rising that its economic recovery is slowing. A soft Retail Sales number heightens those fears and will likely see another fall in local equity markets.

The US releases August Inflation and Core-Inflation tomorrow evening, Industrial Production on Wednesday, and Retail Sales on Thursday. A print well above 0.50% MoM will have tapering chatter rising once again in a slow week, but this FOMC ain’t for moving this month after the Non-Farm Payroll shocker. I want to remind everyone the Fed has a twin mandate, not a singular one. The US Retail Sales is arguably more important. A soft number will have the delta-nerves increasing and some hand wringing about the US recovery. That will probably have the short-term FOMO gnomes then mulling a delayed Fed taper. I told you it was a slow news week.

Things get much more exciting next week. The Canadian election is on Monday, and the daughters and Mrs Halley will be gutted if Justin Trudeau loses because he is so good-looking. That, to be fair, is a much deeper analysis than a lot I see these days by short-term markets to justify moves in asset prices.

More importantly, we have an FOMC meeting next week. Despite the increasing noise from Fed officials, I expect no taper announcement, although they may signal its game-on for the November meeting. We also have a plethora of other central banks announcing policy decisions. Japan, Indonesia and the Philippines in Asia, the United Kingdom, Switzerland, Sweden, Norway and Brazil. It’s not an exhaustive list; I’ve probably missed some. China also announces its most later Loan Prime Rate decision.

Unfortunately, this week looks like another “wait-and-see” affair. It’s usually good for intra-day volatility but bad for those with a time-horizon over 24 hours long, as the markets flip-flop between opposing themes daily. In the spirit of wait-and-see, this week could be a good one to watch from the side-lines.

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