Asian equities tentatively follow China higher
US equities managed a dead cat bounce overnight as Twitter announced it had accepted a takeover bid from Elon Musk. That lifted the tech space on the Nasdaq sparking a relief rally. The S&P 500 rose by 0.60%, the Nasdaq climbed by 1.30%, and the Dow Jones gained 0.74%. The rally was assisted by a rally in US bonds, pushing long-dated yields lower. In Asia, US futures on the three indexes have posted modest 0.20% to 0.25% gains.
China stock markets plummeted yesterday on Covid-19 growth concerns, both the Shanghai Composite and CSI 300 losing around 5.0%. Mainland stock markets refused to take the bait of a foreign currency reserve cut for China banks overnight, starting the day soft as virus testing was extended to all of Beijing. Mysteriously, mainland markets have suddenly rallied along with bombed-out iron ore and palladium futures. I suspect that China’s “national team” has been asked to do some “smoothing” and restore some order to local markets. The Shanghai Composite has risen by 0.40%, with the CSI 300 jumping by 0.90%. The retail hot money is out in force in Hong Kong today as well, the Hang Seng has jumped by 1.70%. All I can say is beware of government-owned fund managers bearing gifts.
In Japan, the Nikkei 225 is tracking the Nasdaq recovery, rising 0.55% today. Similarly, South Korea’s Kospi has climbed by 0.70%, while Taipei is only 0.10% higher. Price action across ASEAN is far more circumspect. Singapore is 0.15% lower, Jakarta is down 0.25%, but Kuala Lumpur has risen by 0.45%, perhaps supported by the Indonesia refined palm oil restrictions. Bangkok has gained 0.65%, with Manila losing 0.75%. Australian markets are playing catch up to the global selloff after being closed yesterday. The ASX 200 has tumbled by 1.80%, with the All Ordinaries retreating by 1.85%.
European equities managed to stem some of the bleedings overnight as the German IFO survey showed resilience. European equities may stick their head above the parapet again today if China’s engineered rally holds, although nuclear war comments from Russia will rightfully dampen enthusiasm. New York’s bullish-forever HODL FOMO gnomes are probably itching to buy the dip again, strong results from Alphabet and Microsoft will give them that excuse.
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