Asian equities are cautious today
The buy everything trade was in full flight overnight, with Wall Street enjoying a strong session. That sentiment has not passed into Asia, which appears to be adopting a much more cautious stance, with regional stock markets a mixed picture today.
The Nikkei 225 has eased by 0.40% on disappointing earnings announcements. US rhetoric on banning Chinese apps is weighing on the mainland today. The Shanghai Composite is 1.10% lower, and the CSI 300 has fallen by 1.30%. A much stronger yuan is also eroding sentiment.
Regionally, Hong Kong has followed the mainland, falling 1.45% today. Singapore has rallied 0.80% as bank earnings remain stable, although profits have dropped. Kuala Lumpur and Malaysia are also higher by 0.50% and 0.70% respectively.
Australia is also pausing for breath this morning, as Covid-19 fears in Victoria and New South Wales saps the positive momentum generated by Wall Street’s rise overnight. The ASX 200 and All Ordinaries are modestly higher by 0.25%.
With investors facing many conflicting signals, there was a certain desperation in the air to find facts that fitted the price action. Something that is all too common these days as “data” has all the answers to everything, allegedly.
The answer, in my view, is very much more straightforward. Financial markets went back to their happy place, with the “FOMO-nistas” catching the first express train out of momentum station. The headless chicken follow the herd price action on show overnight is causing me some concerns today though. Although I believe that US monetary policy is driving a secular rotation out of US dollars and into equities, G-10 and emerging markets currencies, and most notably, precious metals, things may have got a little out of hand overnight.
With Asia content to drift on local issues, rather than blindly following Wall Street’s lead, Europe may also strike a cautionary note after outperforming yesterday. That may be no bad thing, with US Jobless Claims and Non-Farm Payroll data tomorrow, looming as more serious risk points than the market is currently pricing.
