Asian stocks tentatively trail China higher

US stocks pulled off a dead cat bounce overnight as Twitter announced it had accepted a takeover bid from Elon Musk. This lifted the tech space on the Nasdaq, triggering a relief rally. The S&P 500 rose 0.60%, the Nasdaq 1.30% and the Dow Jones 0.74%. The rally was helped by a rally in US bonds, pushing long-term yields lower. In Asia, US futures on all three indices posted modest gains of 0.20% to 0.25%.

Chinese stock markets fell yesterday due to Covid-19 growth issues, with the Shanghai Composite and CSI 300 losing around 5.0%. Mainland stock markets refused to bite the bait of reduced foreign exchange reserves for Chinese banks overnight, starting the day softly as virus testing was extended across Beijing. Mysteriously, the continent’s markets suddenly rallied with bombarding iron ore and palladium futures. I suspect that the Chinese “national team” has been asked to do a “smoothing” and restore order to the local markets. The Shanghai Composite rose 0.40%, with the CSI 300 jumping 0.90%. Retail speculative money is also in full force in Hong Kong today, the Hang Seng jumped 1.70%. All I can say is beware of public fund managers giving giveaways.

In Japan, the Nikkei 225 follows the Nasdaq rally, up 0.55% today. Similarly, South Korea’s Kospi climbed 0.70%, while Taipei is only 0.10% higher. Price action in ASEAN is much more circumspect. Singapore was down 0.15%, Jakarta was down 0.25%, but Kuala Lumpur was up 0.45%, possibly supported by Indonesian restrictions on refined palm oil. Bangkok gains 0.65%, Manila loses 0.75%. Australian markets are catching up with the global selloff after being closed yesterday. The ASX 200 fell 1.80%, with the All Ordinaries falling 1.85%.

European equities managed to stem some of the bleeding overnight as the German IFO survey showed resilience. European stocks could still stick their heads above the parapet today if China’s artificial rally holds, although comments on Russia’s nuclear war will rightly dampen enthusiasm. New York’s ever-bullish HODL FOMO gnomes are probably eager to buy the dip again, strong results from Alphabet and Microsoft will give them that excuse.

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With over 30 years of experience in the foreign exchange market – 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 has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, 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 prominent print publications including the New York Times and The Wall. Street newspaper, among others. He was born in New Zealand and holds an MBA from Cass Business School.