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Asian markets fall on inflation fears

Wall Street got inflation jitters overnight, and with Goldman Sachs highlighting big technology company risks, the Nasdaq tumbled with some of that money flowing into the cyclical-heavy Dow Jones. The S&P 500 fell by 1.04%, with the Nasdaq tumbling by 2.55%, with only the Dow Jones holding its own, finishing just 0.10% lower. Ominously, the sell-off has continued via the futures market in Asian time. Nasdaq futures are 1.0% lower, while S&P e-minis have fallen 0.60%, with Dow Jones futures easing by 0.25%.

The continued fall of the US index futures in Asian time has spooked the retail-driven fast money markets across the region. The Nikkei 225 and Taipei have tumbled by 2.80%, with South Korea down 1.35%, while Hong Kong is falling 2.20%.

On the inflation theme, China’s Official Inflation and PPI data came in almost bang-on expectations today. Inflation YoY for April rose 0.90%, while PPI YoY for April rose 6.80%.

Mainland China’s Shanghai Composite is 0.60% lower, with the more tech-heavy CSI 300 falling 1.15%. The pace of the sell-off in China is being muted by the PBOC injecting liquidity today, and the threat of China’s ‘national team” of state-owned investment funds. The “national team” has been on the bid of late each time mainland markets start to look “disorderly.”

Across regional Asia, Singapore has fallen by 0.70%, with Jakarta and Kuala Lumpur down 0.50%. Iron ore has fallen by 3.0% this morning, adding to the malaise in Australia, with the ASX 200 down 1.15% and the All Ordinaries are tumbling by 1.50%.

European shares should open weaker this afternoon, with US indexes continuing to sell off in Asia. We have been here before with inflation scares and extended valuations in technology fraying investor nerves. Nevertheless, the technical break of support by the Nasdaq overnight is significant. If it does not recapture that tonight, equities could be in for a torrid week. From my perspective, though, I would like to see the downside break confirmed, as I have learnt how to spell whipsaw from previous calls.