Asian equities shrug off Wall Street retreat

There is a feeling today in the air of “every man for himself”, with the equity markets diverging in their own directions in the US and Asia. A combination of tightening yields and the impending two-day testimony by Fed Chairman Powell starting today in Washington DC seems to have provoked differing reactions across different markets.

Wall Street had another negative session overnight, as inflation concerns increased bubble nerves, notably on the tech-heavy Nasdaq. The S&P 500 fell 0.77%, while the Nasdaq was in full retreat, losing 2.46%. The more cyclical Dow Jones, by contrast, managed to cling to a 0.09% gain.

The dip buyers are out in Asia, with US futures all tracking higher and Asia-Pacific equities all riding the cyclical upturn commodity wave. The exception being the tech-heavy Taiwan and South Korean indices. The Nikkei 225 is 0.46% higher, while the Kospi has retreated 0.40%, and Taiwan has fallen 0.20%.

In mainland China, local markets have shrugged off yesterday’s digital co-lending regulatory hiccup, the Shanghai Composite rising 0.55% and the CSI 300 climbing 0.10%. Hong Kong has powered 0.90% higher, with Singapore increasing 0.60%, Jakarta 0.30%, and Kuala Lumpur 0.40%, with Bangkok rising 1.0%.

Steeper yield curves and higher commodity prices have lifted Australian equities higher, led by banks and resources. The ASX 200 and All Ordinaries have both climbed 0.50% higher.

Asia has probably seen the best of the intra-day rally now, with the risks around the Powell testimony this evening likely to temper exuberance. Europe and the UK should follow suit this afternoon but will run into the same Powell roadblock.

Mr Powell’s testimony this evening will be closely watched. Expect every single word to dissected, looking for hints that the Fed may blink sooner than expected. That is nonsense, of course; America still has 10 million more unemployed than before Covid-19. Mr Powell will go out of his way, I am sure, to put tapering to bed and rightly so, as I dread to think what a taper-tantrum of the 2020s will look like.