Asian markets slide as oil surges

Oil prices sink Asian equity markets

The massive oil-price spike this morning, has sunk equity markets across Asia, coming after a weak finish on Friday in New York despite a monster Non-Farm Payrolls print. With most of Asia being massive net energy importers, it is hard to construct a bullish case tight now, and with the stagflationary wave coming sure to hit Asia hard, any rallies will probably be measured in days and not weeks.

On Friday, US equities finished on a weak note as markets watched oil prices rise and worries mounted that the Fed would enact more hikes this year than expected. Bond yields actually fell on Friday, but mostly at the long end of the curve. Part of this would be weekend risk-hedging purposes, but part may also be markets pricing in recessionary outlooks, flattening the curve on its way to inversion. That was another reason not to be bullish equities.

The S&P 500 closed 0.79% lower, the Nasdaq retreated 1.66%, while the Dow Jones fell by 0.66%. US futures have collapsed in Asia as oil spiked. S&P 500 futures are down 1.65%, Nasdaq futures by 2.05%, and Dow futures by 1.35%.

Asian markets are in full retreat, led by Japan’s Nikkei 225 which has plummeted by 3.35%. South Korea’s Kospi is 2.35% lower. In mainland China, the Shanghai Composite is down by 1.10%, while the CSI 300 has fallen by 1.90%. Hong Kong markets have also plummeted, the Hang Seng is down by 3.35%.

In regional Asia, the picture is just as grim. Singapore is 0.80% lower, but Taipei has retreated by 2.90%. Kuala Lumpur and Jakarta are down 1.0%, while Bangkok has fallen by 1.20%. and Manila by 2.45%. Australian markets are also lower, the ASX 200 and All Ordinaries have fallen by 1.10%.

If the early price action is saying anything, it is the Asian markets with a higher beta to the tech story are suffering more than those markets which are more commodity and traditional industry-centric. Nevertheless, Brent crude at USD 130.00 has negative ramifications, even for commodity producers.

European markets will draw the go directly to jail Monopoly card this afternoon, and look set to endure an extended period of pain, sandwiched between Ukraine’s front line and the massive jump in energy and commodity prices. US markets will probably open more nervous than Joe Biden’s mid-election hopes this evening. If oil prices correct sharply lower, they may gain temporary respite. Although Ukrainian and Russian officials are scheduled to meet again, none of the rhetoric from the Kremlin suggests Mr Putin is in any mood to compromise and thus, a respite from that direction will once again, be temporary at best.

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

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is 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, Channel News Asia as well as in leading print publications including 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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