Nasdaq slide sends Asia lower

China is the one bright spot for Asian equities today

The buy-the-dip rally yesterday quickly ran out of steam in New York as Tesla stock plummeted and Russia announced an impending ban on natural gas exports to Poland and Bulgaria. Although US data held steady, the miss in earnings by Alphabet has darkened the move and the overnight price action across asset classes suggested a full-on move to defensive positioning. US equities had a terrible day at the office. The S&P 500 fell by 2.80%, the Nasdaq tumbled b 3.93%, and the Dow Jones retreated by 2.38%. The S&P has fallen through its February lows, while the Nasdaq is in danger of testing its 4,100 February low. Only the Dow, with its value orientation, is holding steady, albeit in a 1-year sideways range.

In Asia, the giant falls overnight in US markets have proved irresistible to bargain hunters once again. US futures have edged higher. S&P futures have added 0.45%, Nasdaq futures 0.50%, and Dow futures 0.70%. The price action looks optimistically corrective in nature.

In Asia, China is the one bright spot as markets have risen in response to a slow day for Covid-zero headlines, and better than expected Industrial Profits data. In a rerun of yesterday, the Shanghai Composite has risen by 0.40% with the narrower Shanghai 50 gaining 1.25%. The CSI 300 has rallied by 1.13%, but tellingly, Hong Kong’s Hang Seng has only edged 0.10% higher. Yesterday we saw similar gains by mainland indexes, only for rallies to evaporate later in the day. I suspect, like yesterday, there is a little “national team” help around today. Nothing has materially changed with China’s situation and the rallies today should be treated with caution.

Elsewhere, it is a sea of red in Asia with a split once again, between the more Nasdaq-correlated North Asia heavyweights, and the more value-orientated markets of ASEAN. Japan’s Nikkei 225 has slumped by 1.45%, with South Korea’s Kospi tumbling by 1.15%, and Taipei retreating by 1.70%. Singapore is down just 0.10%, with Kuala Lumpur 0.30% lower, and Jakarta easing by 0.60%. Manila has fallen heavily by 1.75%, and Bangkok is just 0.05% lower.

Australian markets are also lower today, but not as badly as I feared after much higher than expected inflation data. Australia’s heavy resource base makes it a potential winner the more aggressive Russia becomes in the international energy and resource market. That seems to be limiting the losses in the lucky country which usually has a high US correlation. The ASX 200 is down 0.72%, while the All Ordinaries have fallen by 0.70%.

Nothing about Russia’s move to ban natural gas exports to Poland and Bulgaria today can be construed as bullish for European equities. Nor can the threat of widening Russian retaliation in this space be either. As such, I expect European markets to open sharply lower today and stay that way, regardless of developments elsewhere.

US markets will be dictated by whether the FOMO gnomes of Wall Street are in bargain-hunting mode, or not. Meta’s quarterly results are likely to have the final say on whether the overnight meltdown pauses for breath or doesn’t pass go on its way directly to jail.

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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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