Asian equities diverge

Asian markets look for direction

Friday’s US data dump saw the interest rate hawks win the day, thanks to both the participation and unemployment rate tumbling lower. That saw US equities retreat once again, although a soft Non-Farm headline print took the edge of the negativity. The S&P 500 fell 0.41% with the tech-heavy Nasdaq bearing the bearish brunt once again, falling by 0.96%. The Dow Jones outperformed relatively, almost unchanged at down 0.02%. The perception that value-centric Dow Jones and Russell 2000 companies will be a better inflation hedge continues to rule markets. In Asia the trend continues, Dow futures are unchanged, S&P 500 futures are 0.10% lower, while Nasdaq futures have fallen by 0.35%.

In Asia, we are seeing some divergence, complicated by omicron nerves in Australia, Japan, and China and India. Japan is closed today, but we can assume that if the Nasdaq is lower tonight, the Nikkei will drop like a stone tomorrow. The tech-heavy South Korean Kospi is 1.10% lower. Mainland China sees the Shanghai Composite and CSI 300 0.25% higher, and I suspect some “smoothing” by authorities is happening. Hong Kong has jumped higher by 0.85%, led by mainland healthcare stocks.

Singapore is 0.75% higher today in what looks like an inflation defensive play with the gains being led by the three local mega-banks. Taipei is just 0.10% higher, while Jakarta is up 0.25% and Kuala Lumpur has gained just 0.15%. Manila is 1.45% higher, and Bangkok is down 0.10%. A weak New York session and omicron cases spiralling into space see Australian markets lower today, but only marginally so thanks to the banking and resource heavyweight backstop. The All Ordinaries and ASX 200 are down just 0.10%, having recovered earlier losses.

The more value-centric European markets are unlikely to suffer the technology ill-winds of the US or the virus nerves of Asia, and I would expect them to open modestly lower today. Of far more interest to Europe, this week will be the government debt auctions and the 10-year bund. If that moves above 0.0%, European equities could take fright, as the only region of the world more addicted to central bank money than Europe, is Japan.

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