Equities in Asia follow the Wall Street retreat

From my perspective, the price action we are seeing in the equity markets indicates either the last rites of a massive bull market or a noisy consolidation before a new directional move higher. I am in the former camp, and of the view that the risks of a material move higher in US longer-dated bond yields increase. That, I believe, will be the trigger for a long-overdue correction lower in the equity markets. I would emphasise correction, though, as the ocean of central bank money distorting asset prices will not go away, nor will the high global savings rate, and the global economy should continue to recover. I cannot see that changing until the world’s major central banks taper and start hiking rates, although I am dreading the inevitable taper tantrum’s scale when it finally occurs.


Asian equities are lower today after Wall Street fell after deciding the theme of the day was inflation worries. The S&P 500 fell by 0.85%, the Nasdaq retreated by 0.56%, and the Dow Jones finished 0.78% lower. In Asia, futures on all three indices have continued falling, with all three down around 0.40%.


The tail-chasing retail mafia has sent the Nikkei 225 1.61% lower today, while Seoul and Hong Kong dodge the bullet by being closed for holidays. Reports that the European Parliament will freeze its investment agreement with China is weighing on mainland equities. The Shanghai Composite is 0.50% lower, while the CSI 300 has edged 0.15% lower.


The rest of Asia is playing follow the leader, with Taipei falling 0.15%, partially supported by bargain hunters. Singapore has fallen by 0.50%, with Kuala Lumpur and Jakarta down 0.65%, while Bangkok and Manila have eased 0.25% lower. Australia is enduring a torrid day after China signalled it would try to diversify iron ore sources overnight. Combined with a lower Wall Street and Westpac Consumer Confidence that missed severely, the ASX 200 and All Ordinaries have plummeted by 1.80%.


Early Europe is likely to follow Asia’s lead today, absent any unexpected bullish headlines from the news tickers. The chop-fest price action will continue to turn day-traders inside out confuse longer-term investors for the rest of the week.