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AUSSIE 10-YEAR TECHS

(Z1) Off Lows, But Remains Weak

USDCAD TECHS

Still Vulnerable

AUDUSD TECHS

Bullish Price Sequence

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It was a bit of a topsy turvy Asia-Pac session for equities, with markets running in both directions, although the low base that Monday provided re: a relative comparison in stability allowed the market to feel a little more at ease, with e-minis moving further away from Monday's lows after Wall St. trade saw U.S. equities record their worst day in months.

  • The Hang Seng fully reversed its early losses at one point, before drifting lower as we moved towards the lunch bell. It would seem that the feeling that the Evergrande situation may prove to be contained as opposed to China's Lehman-like event became a little more widespread during Tuesday's Asia-Pac trade, although we shall see how Chinese onshore markets react when they return from the elongated weekend on Wednesday. Note that S&P pointed towards a likely default on the part of Evergrande, which most now expect.
  • The Nikkei 225 shed ~1.5% after the long weekend in Tokyo, playing catch up to the broader risk environment witnessed on Monday.
  • A reminder that Monday saw one of J.P.Morgan's noted strategists write that "the market sell-off that escalated overnight we believe is primarily driven by technical selling flows (CTAs and option hedgers) in an environment of poor liquidity, and overreaction of discretionary traders to perceived risks. However, our fundamental thesis remains unchanged, and we see the sell-off as an opportunity to buy the dip." This may have been a supportive factor when it came to Monday's late bounce from lows (as the comments got a wider airing in the financial press).