There are some serious divergences in Asian equity markets this morning as China concerns buffet some markets, while others rise on lower oil and Ukraine negotiation hopes. On Friday, US markets finished on a soft note as Michigan Consumer Confidence fell, and investors reduced risk into the weekend. The S&P 500 fell by 1.30%, the Nasdaq retreated by 2.18%, and the Dow Jones slipped by 0.69%. Hopes that Ukraine-Russia negotiations are moving in the right direction has seen US futures rise today. S&P500 and Nasdaq futures rising 0.50%, while Dow futures have edged 0.25% higher.
Negotiation hopes led to lower oil prices as well today, which has lifted Japan’s Nikkei 225 0.95% higher, with the other main beneficiary being the perpetual optimists in Australia. The All Ordinaries and ASX 200 climbing 1.0%, while New Zealand has climbed back to unchanged after the government cut fuel taxes.
Chinese markets fall over Shenzhen lockdown
Elsewhere though, Asia is a sea of red after China announced a full lockdown of Shenzhen over the week for at least a month. That has been followed by a procession of multinational companies announcing halts to production at facilities located in the region. Fears of further supply chain disruptions if the port closes, or lockdowns spread, have combined to weigh heavily on Asian markets. The evolution of China’s omicron situation will potentially have more weighting on Asian sentiment this week than the FOMC.
Mainland China sees the Shanghai Composite falling 1.35% with the CSI down 1.70%. Hong Kong is in full retreat as it grapples with its own virus nightmare, the Hang Seng plummeting by 3.75%. South Korea’s Kospi is 0.75% lower, and Singapore has fallen 0.70%. Taipei is down 0.60%, with Kuala Lumpur falling by 0.45%. Jakarta is bucking the trend as more and more investors look at commodity prices and pick Indonesia as a winner. Jakarta is 0.50% higher today. Bangkok is up 0.15%, but Manila has plummeted by 3.55% on a combination of currency weakness, mounting government debt repayments, pre-election nerves, weaker Asian growth and stagflationary pressures that have only mounted through the pandemic.
As ever, the rallies seen today in Asia and on US futures are just one headline away from disappearing. European markets tentatively dipped their toes in the water on Friday and will likely do the same again today on Ukraine-Russia negotiation hopes. But sentiment will remain fragile in European equities for the foreseeable future for reasons I don’t have to explain.
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