Asian markets deep in negative territory

Wall Street ended lower overnight with the Dow Jones and Nasdaq swapping places from the day before as the worst performers. Inflation concerns were blamed, but the price action has all the hallmarks of an extended bull market running out of steam and looking for excuses.

The S&P 500 fell 0.87%, with the Nasdaq finishing just 0.09% lower after recovering from an intra-day tech sell-off. Meanwhile, those cyclical rotational flows from Monday reversed course with the Dow Jones overnight, as it tumbled by 1.36%. For the second day running, the futures on all three indices are under pressure again in Asia, down around 0.75%.

The Nasdaq continues to concern. It broke its March 2020 support line on Monday and failed to recapture it. It has now slipped once again below the 100-day moving average (DMA) at 13,300.00. My technical target is the 200-DMA at 12,500.00, and the Nasdaq will face a severe test tonight if US CPI outperforms.

The negativity has seeped into Asian markets once again, which have been weighed down by Covid-19 concerns in recent times anyway. The Nikkei 225 has retreated 2.45%, with significant support at 28,300.00 being breached today. The Kospi is 2.0% lower.

Taiwan markets plummeted by nearly 9.0% this morning and are presently down 5.0% for the session. Local semi-conductor heavyweights led the rout, but it seems that community-based Covid-19 cases are the source of the Taiex’s woes. Markets are taking fright that virus restrictions may be escalated, which potentially will exacerbate the semi-conductor shortage. If that comes to be, and production is slowed, it is sure to be felt worldwide in other equity markets.

Mainland China, meanwhile, is a bastion of calm, much like yesterday. Both the Shanghai Composite and CSI 300 are down just 0.20%, and one suspects that China’s “national team” are continuing to support local markets. The Hang Seng, in contrast, has joined the Nikkei and Kospi in tumbling by 2.0%.

Singapore has edged 0.65% lower, with Bangkok down 1.25% and Kuala Lumpur holding steady. Jakarta is closed for the Eid holiday, as will Malaysia and Singapore be tomorrow. Australian markets have moved lower after Wall Street fell overnight, and a slightly negative reaction to the Federal budget today. The ASX 200 and All Ordinaries are down around 1.0%.

Potential Taiwan Covid-19 restrictions curtailing semi-conductor production would be yet another knife in the back of under stress global supply chains. It will undoubtedly be felt globally in equity markets if it comes to pass. In the meantime, markets remain fixated on inflation, and if US CPI exceeds expectations, the global equity sell-off will continue and potentially accelerate.