Shanghai nerves weigh on Asian equities

Asia markets follow Wall Street lower

US markets couldn’t shake off the inflation/recession hoodoo last night after European markets endured a torrid session as the ECB swung to a hawkish stance. The S&P 500 slumped by 2.38%, the Nasdaq tumbled by 2.75%, and the Dow Jones lost 1.95%. In Asia, US futures have seen some modest short covering, lifting the S&P and Dow futures 0.20% higher, with Nasdaq futures gaining 0.35%.

In Asia, the overnight Wall Street performance was never going to give local markets a good start. But with US data and weekend risk ahead, as well as lockdown nerves around widening mass testing in Shanghai this weekend, regional markets are almost all in the red today. Japan’s Nikkei 225 has fallen by 1.35% today, with South Korea’s Kospi falling by 1.15%.

In Mainland China, equity markets have reversed earlier losses and are in modest positive territory. The Shanghai Composite is now 0.22% higher, while the CSI 300 is flat. I suspect that the authorities’ “national team” might be “smoothing” today. Hong Kong is performing better than expected, perhaps lifted by Ant Financial IPO hopes. Nevertheless, it remains 0.55% lower.

In regional markets, Singapore has fallen by 0.65%, with Taipei losing 0.85%. Kuala Lumpur has dropped by 1.0%, with Jakarta just 0.15% lower. Bangkok is 0.45% lower as it removes its last Covid restrictions on inbound travellers, but Manila has slumped by 1.90%. Australian markets are tracking Wall Street and China nerves, the All Ordinaries falling 1.0%, with the ASX 200 losing 0.85%.

The tone in Asia, ahead of crucial US inflation data, means that European equities are poised to open lower once again this afternoon. If Bund/BTP spreads widen once again today, nerves will be further frayed. Only a lower US inflation number this evening is likely to bring any solace to European markets. US markets are a 100% binary outcome of the US inflation data.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was 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 and Channel News Asia as well as in leading print publications such as 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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