Asian stock markets sold off, with Hang Seng and CSI 300 extending yesterday’s slide, as concern about China’s property sector deepened. Evergrande Group’s mainland unit said it failed to repay an onshore bond, which added to uncertainty over the future of the developer. Attempts to get restructuring plans back on track are ongoing, but investors are worrying about the risk of a potential liquidation.
European and US futures are also in the red, as Treasury yields continue to rise. The hawkish, higher for longer stance from the FOMC and most major central banks has put bears in control. Fears over sustained inflationary pressures, largely thanks to the resilient economy and higher oil prices weighed. The advent of supply is adding to the rise in rates too.
Moody’s also noted that a government shutdown, which is possible at the end of the month, would be a “negative” for ratings. Wall Street also reversed opening losses with the bump in risk appetite also hurting Treasuries.
- FX – USDIndex has cleared the 106 mark as risk aversion picks up. EURUSD and GBPUSD both broke below 1.06 and 1.22 support levels respectively. The USDJPY firmed to an intraday high of 149.18.
- Stocks – JPN225 slipped 1.0% to 32,054, ASX dipped 0.5% to 7,044.90, Hang Seng shed 0.9% to 17,576.83, while the Shanghai Composite fell 0.2% to 3,109.69. Amazon rose 1.7% and was the strongest single force pushing up the US500. US500 fell 0.4% as of London open, while US100 futures fell 0.6%.
- Commodities – Oil slipped below 88.00, with next support level at 86, due to US Dollar strength, which looks to outweigh supply tightness.
- Gold- retested 200-day SMA at 1909.
Today: BoE Governor Bailey’s meeting of the central bank’s Financial Policy Committee and US CB Consumer Confidence & New Home Sales.
Interesting Mover: VIX (+5.5%) extending to 1-month resistance at 18.20.
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Andria Pichidi
Market Analyst
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