 Asian markets are in crisis mode as dragged down by the stock market crash in the US over night. At the time of writing, Nikkei is down -970 pts or -4.13%. Singapore Strait Times is down -89.59 pts or -2.86%. Hong Kong HSI is down -1010 pts or -3.86%. And, China Shanghai SSE is down -4.61% at 2600. Key support level at 2638 (2016 low) is taken out and 2600 handle looks vulnerable. Overnight, DOW dropped -831.83 pts or 3.15% to 25598.74. S&P 500 lost -3.29% and NASDAQ fell -4.08%. Treasury yields were strong with 10 year yield up 0.017 at 3.225. The biggest test today is US consumer inflation. Both headline and core CPI are expected to accelerate in September. Any upside surprise would further affirm Fed's rate path and could prompt deeper selloff in stocks. In the currency markets, Dollar is trading as the weakest one in Asian session and gets not support from surging yield. Trump's unjustified scapegoating attack on Fed could be a reason for the weakness. But it should be reminded that Fed is doing a good job in achieving its dual mandate in both employment and inflation. If Fed's rate path is being seen as too fast, it's because of the pro-cyclical fiscal stimulus, the tax cuts, that was launched earlier this year. The fiscal stimulus also set up the a trap on investors by giving unnecessary boost to the stock markets for this year's upleg. So who's to blame? For today, Yen also pared back some gains and is trading as the second weakest. On the other hand, New Zealand Dollar is the strongest one, followed by Swiss Franc and then Euro. The weekly picture is actually more representative on what's happened. Yen is the strongest one for the week, followed by Sterling. Canadian Dollar is the weakest one, followed by Dollar and then Australian Dollar. |
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