Hong Kong and Australian equities take a beating
FOMC tapering nerves and increasing noise from Washington DC around the debt ceiling and tax hikes sent Wall Street lower on Friday. Friday also saw index futures and option and single-stock option expiries, which could have distorted an already nervously negative move. Wall Street finished the week on a continuing negative tone with the S&P 500 falling 0.92%, the Nasdaq falling by 0.91%, and the Down Jones losing 0.48%. All three indexes finished only slightly lower for the week though, which was dominated by large swings in daily sentiment thanks to a depleted tier-1 data calendar.
In Asia, the story is rather glummer. Commodity prices are tanking this morning over China growth concerns and the threat of Evergrande in China missing debt payments this week. With mainland China, South Korea, Japan and Taiwan closed, Hong Kong has borne the brunt of the risk aversion flows. The Hang Seng has collapsed by nearly 4.0% with property stocks under the hammer.
With its high beta to commodity prices, Australian markets are also suffering after the commodity sell-off today. Woes surrounding the French submarine order cancellation and its threat to an EU free-trade deal are also darkening the mood. The ASX 200 has tumbled by 2.30%, while the All Ordinaries has retreated by 1.90%.
Elsewhere, Singapore is 0.35%, while Kula Lumpur has dropped by 0.65% with Bangkok lower by 0.40% and Manila by 0.15%. Jakarta has fallen by 0.55%. The fall-out on regional Asia has been limited thus far, with investors preferring negative sentiment in the more correlated, and more liquid, Hong Kong and Australian markets. With tapering noise around the FOMC increasing, ASEAN markets will struggle to maintain material rallies this week, especially with the Northern Asia heavyweights taking holidays.
Given the negative finish on Wall Street, and the heavy selling in key Asia Pacific markets today, European markets will open slightly lower this afternoon. However, a lower euro, and much lower commodity prices are likely to be positives at the periphery for Europe, limiting negativity from tapering and China nerves.