Fed, China, weigh on Asia markets

Asian equities crushed on US hike/China growth fears

The week ended sourly on Friday as Wall Street did not pass go and headed directly to jail, even as US yields remained relatively stable. A combination of weekend risk factors and increasing fears that the Fed will accelerate rate hikes torpedoed equities. The S&P 500 collapsed by 2.77%, the Nasdaq tumbled by 2.55%, while the Dow Jones was pummelled by 2.80%. The sell-off continues in Asia, with futures on all three indexes down by between 0.35% and 0.50%.

Asia had zero reasons to be bullish anyway, but weekend news of virus restrictions in a district of Beijing and tightening restrictions in Shanghai deepened fears that Covid-zero will torpedo China growth. Asian markets are in full retreat as China stimulus remains high on talk, and very short on action, other than weakening the currency. Mainland China stock markets have been battered, the Shanghai Composite tumbling by 2.45%, and the CSI 300 falling by 2.20%. Hong Kong is having an even worse day, falling by 2.60%.

In Japan, the Nikkei 225 is 1.70% lower, with South Korea’s Kospi losing 1.45%. Taipei has fallen by 2.25%, with Singapore down by 0.30%. Kuala Lumpur is down by 0.45%, Jakarta is lower by 0.20%, while Bangkok and Manila have fallen by 0.90%. Australian and New Zealand markets are on holiday today. The ASEAN triad of Indonesia, Malaysia and Singapore, with a heavy weighting of old school resources and banking heavyweights, seems to be gaining some defensive flows at the expense of the North Asia heavyweights.

European stock markets can also anticipate a negative opening as the China growth contagion washes up on their shores. President Macron soundly beat Marine Le Pen in yesterday’s presidential runoff election; however, markets had priced this in last week. Any post-election sigh of relief will be very shallow.

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