Asian markets calm after US yields rise
Cyclical rotation flows dominated Wall Street on Friday, as US bond yields suddenly spiked higher. Technology bore the brunt of the assault, the Nasdaq falling 0.59%, while the S&P 500 roses just 0.10%, while the Dow Jones climbed by 0.90%. Dovish comments by Treasury Secretary Yellen over the weekend see the futures on all three indexes up by 0.20% this morning, lending a sense of calm to Asian equities.
The Nikkei 225 is 0.30% higher today, while the Kospi is now unchanged. Mainland China’s Shanghai Composite has recovered some earlier losses but is still down by 0.40%, with the CSI 300 has fallen by 0.95%. Today’s China data was mixed, and retail sentiment remains fragile. This week, it will be interesting to see if China’s “national team” steps in once again if markets move sharply lower.
Hong Kong has climbed 0.45% as the Hang Seng rebalancing starts on a modest scale today, notably with Ali Baba Health being added. Singapore has risen 0.30%, Taiwan has fallen 0.10%, while Kuala Lumpur is 0.40% higher. Australian markets are quiet, with the ASX 200 and All Ordinaries just 0.20% higher.
Some degree of cyclical rotation is evident in Asia today, much like Wall Street on Friday night. After Friday’s bond rout, the grit of equity markets today will give confidence to European stocks at their open. Overall, it appears that the rotation from tech to cyclical recovery stocks is the preferred option to any rise in bond yields for the early part of the week. Markets are likely to range for the remainder of the session in Asia.
Despite Yellen’s dovish message over the weekend and the steadying nerves in Asia this morning, I do note that sentiment of late turns on a dime in the US right now. Last Friday’s jump in US Treasury yields highlighting this risk. Although all eyes will be on the FOMC meeting midweek, do not discount US Retail Sales’ potential fallout tomorrow night. Retail Sales are expected to fall by -0.60% MoM for February and equity markets could respond negatively.
