Asian equities start the week lower

Recession fears weighing on markets

Asian markets are off to a weak start as the recessionary fears sweeping the US on Friday, continue to weigh on sentiment in Asia. For once Asian markets are not moving in lockstep with the US ones, and I put that down to the distortions of options expiries on Wall Street on Friday. The S&P 500 closed up just 0.22% on Friday, but the Nasdaq leapt 1.43% higher, while the Dow Jones edged 0.16% lower after soft US Manufacturing and Industrial Production data. In Asia, US futures are rising, although with it being a US holiday today, I am not placing too much emphasis on the price action. S&P futures are 0.17% higher, Nasdaq futures are 0.50% higher, while Dow futures are unchanged.

Another outperformer is China, which is well and truly bucking the trend in Asia today. Mainland China markets have reversed sharply higher after China left its 1 and 5-year LPRs unchanged, a counterintuitive move. News that Shenzhen has apparently locked some neighbourhoods in virus curbs should also be a headwind. Nevertheless, the Shanghai Composite is now unchanged, but the CSI 300 has risen by 0.65%, with Hong Kong’s Hang Seng edging 0.15% higher. The price action looks to be “buy at worst” and “smoothing.”

Over in Japan, the Nikkei 225 has fallen by 1.0%, with South Korea’s Kospi slumping by 2.20% today. Taipei is 1.10%, with Singapore remaining unchanged. Kuala Lumpur has lost 1.25%, while Jakarta is 0.90% lower, and Bangkok and Manila have eased by 0.10%. In Australia, falling China resource prices have pushed the ASX 200 down by 0.45%, with the All Ordinaries losing 0.65%.

After such a torrid week last week, a corrective bounce by equity markets cannot be ruled out this week. However, that may have to wait for another 24 hours as US markets are closed today. With nothing on the calendar of note today, European markets may take some solace from lower energy and commodity prices, although European natural gas supplies are tighter than ever as Russian flows reduce.

For US markets, the plethora of Fed speakers this week, including a double-header from Jerome Powell, are likely to drive intraday volatility in the absence of many tier-1 data releases.

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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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