Hong Kong and Australian stocks take a hit
Weakening FOMC nerves and growing noise from Washington DC around the debt ceiling and tax hikes pushed Wall Street down on Friday. Friday also saw index futures and expirations of single stock options and options, which could have skewed an already nervously negative move. Wall Street ended the week on a still negative tone with the S&P 500 down 0.92%, the Nasdaq down 0.91% and the Down Jones down 0.48%. All three indices, however, ended only slightly lower for the week, which was dominated by sharp swings in daily sentiment thanks to a depleted Level 1 data schedule.
In Asia, the story is rather gloomy. Commodity prices collapse this morning amid growth concerns in China and the threat that Evergrande in China will not pay off its debt this week. With the shutdowns of mainland China, South Korea, Japan and Taiwan, Hong Kong has been hit hard by risk aversion flows. The Hang Seng slumped nearly 4.0% with real estate stocks under the hammer.
With its high beta at commodity prices, Australian markets are also suffering from the massive sell off of commodities today. The woes surrounding the cancellation of the French submarine order and its threat of a free trade deal with the EU also darken the mood. The ASX 200 fell 2.30%, while the All Ordinaries fell 1.90%.
Elsewhere, Singapore is at 0.35%, while Kula Lumpur is down 0.65%, Bangkok down 0.40% and Manila 0.15%. Jakarta fell 0.55%. The spillover to regional Asia has been limited so far, with investors preferring negative sentiment in the more correlated and more liquid markets of Hong Kong and Australia. With increasing noise around the FOMC, ASEAN markets will struggle to sustain significant rallies this week, especially with North Asian heavyweights taking vacations.
Given the negative result on Wall Street and massive sales in key Asia-Pacific markets today, European markets will open slightly lower this afternoon. However, a weaker euro and much lower commodity prices are likely to be positive on the outskirts of Europe, limiting the negativity of tapering and the nerves of China.
This article is for general informational purposes only. It is not an investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leverage trading is high risk and not for everyone. You could lose all of your deposited funds.
With over 30 years of forex experience – from spot / margin trading and NDFs to currency options and futures – Jeffrey Halley is OANDA’s Senior Market Analyst for Asia- Pacific, responsible for providing timely and relevant macroeconomic analysis covering a wide range of asset classes. He previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat International Bank, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times. and The Wall. Street Journal, among others. He was born in New Zealand and holds an MBA from Cass Business School.
