China Outperforms, Tech Sensitive Markets Slump

Asia-Pac equities are in the red, with losses varying from less than -1% to close to -3%. This follows the Asia-Pac equities are in the red, with losses varying from less than -1% to close to -3%. This follows the sharp falls in US markets on Friday night, as US Fed Chair Powell struck a hawkish tone with markets (higher rates and for longer), which has filtered through into US fixed income moves today (US 2yr yield to 3.468%, +7bps, fresh highs since 2007) US futures are lower, albeit away from worst levels. Eminis were last at 4025, compared with earlier lows around 4005 (still -0.85% for the session). The 50-day MA comes in at 4005.38 at the moment.

• China and Hong Kong markets have outperformed on a relative basis. The Hang Seng is down around 0.65% currently, with the tech sub-index only down a touch (-0.05%). Positive spill-over from Friday's preliminary agreement, which will allow the US to audit China firms and possibly prevent delistings, has likely helped. The NASDAQ Golden Dragon China Index closed down 0.65% on Friday but outperformed the broader tech sell-off.
• The CSI 300 is down 0.40%, while the Shanghai Composite is around flat. China equities typically trade with a much lower beta to offshore moves, particularly on risk-off days. Still, the real estate sub-index remains a drag (off 1.88% for the CSI 300)
• The Kospi and Taiex are down sharply, by markets off by over 2.3%. This fits with the weaker tech lead from US markets on Friday night and the further gains in US yields today. The tech sector has shown strong sensitivity to US yield moves in 2022. The South Korean authorities have announced they will launch an investigation into short-selling of stocks this week.
• The ASX200 has also slumped, down over 2%. Outside of IT weakness, heavyweights in the materials and financial sub-sectors have fallen by slightly more than the headline index. Commodity prices have remained on the back foot (ex Oil). CMX copper is now off by 2%, iron ore down by 4% to $101.45/tonne. Gold is also down by 0.65% to $1727.