Asian equity markets traded mixed with risk appetite dampened following the losses on Wall Street. Most majors indexes retreated from their recent record highs with the declines led by tech and growth sectors amid a rise in yields and bond selling. Nikkei 225 underperformed as the recent detrimental FX flows reflected across Japanese equities. Exporters took the brunt after USD/JPY temporarily retreated to 108.00 after speculative traders turned net short in the JPY; some bond outflows from Japan also materially picked up. Worth keeping an eye on how the Yen will perform in the coming days with interest rate differentials, bringing some volatility to the global Fixed Income complex since last week. Hang Seng and Shanghai Composite were indecisive after an absence of surprises from the PBoC, which kept the status quo on rates for a 12th consecutive month as expected with the 1-year and 5-year Loan Prime Rates kept at 3.85% and 4.65%, respectively. Traders will be paying close attention to Asian bond-equity dynamics in the session after the recent poor risk sentiment in global risk assets following Q1 solid gains.
In Wall Street, Tuesday extended Monday’s risk-off in stocks, especially the small-cap Russell 2000, which fell 2% in a profit-taking price action type of move, and traders are focusing on company earnings releases that are firmly coming out this week. The S&P 500, Nasdaq and Dow Jones all dropped a more softened 0.7%, although the fear index, the VIX, nearly snipped to the upside earlier in the session – where it has not been since March. The sessions ahead might bring some defensive with cutting and profit-taking some risky positions and adding some exposure in safe assets by Asian and global investors as Tokyo and Osaka will ask the Japanese government to declare a state of emergency. Glitches with vaccine rollouts are also growing attention about the pace of reopening in Developing and Emerging economies.
