Equities slip as US Treasury yields rise
Asian stock markets are a sea of red today as higher yields ahead of the FOMC pushed US markets into the red. The S&P 500 fell by 0.76%, the Nasdaq slumped by 2.07%, while the Dow Jones finished unchanged. US futures have seen a modest rebound, Nasdaq futures rising 0.50%, but that has not translated into material support in Asian markets.
The only exceptions today are Japan, where the government and BOJ talked stimulus and easy monetary policy, which has lifted the Nikkei 225 by a paltry 0.35%. Singapore has also risen by 0.65%, potentially catching some haven flows and also coat-tailing the growth-centric Dow Jones’ robust performance overnight.
Asian markets seem more fixated suddenly on China economic nerves, despite the strong data today, and the pre-FOMC fright shown by US markets overnight. Mainland China’s Shanghai Composite has slumped 2.20%, with the CSI 300 falling 1.75%. Hong Kong has plummeted for the second day in a row, down by 2.85%.
In regional markets, the Kospi has fallen 0.75% while Taipei has slumped 1.85% as Foxconn suspended operations in Shenzhen. Kuala Lumpur is 0.45% lower, and Jakarta is down just 0.25% with Indonesia likely to be the stagflation winner in Asia initially. Manila is 0.85% lower while Australia’s ASX 200 has fallen 0.75% and the All Ordinaries by 0.90%.
European markets rallied strongly overnight on Ukraine-Russia negotiations, a rally that has lasted a couple of sessions. There is still room for more, and Europe will be boosted by the sharp falls in natural gas and oil prices, even if they can’t get it from anywhere except Russia. If the week goes on with no notable progress, I expect this momentum to wane, and a hawkish FOMC this week could stop the recovery rally in its tracks.
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