Asian stocks reversing some gains

Asian stocks are reversing some of the gains made yesterday, after US data showed a slowdown in home prices and consumer confidence. 

The previous inflows into ETFs turned into outflows as investors grapple with the slowing China and US economy.

The strong February performance in the US stock market has led the S&P500 shy from its all-time high.

The lack of inertia where the benchmark has drifted lower towards the close in the past two trading sessions, created some cautions in the market.

The past couple of week’s rally has been a result of ignoring bad news and focusing on the M&A activities. 

This appears to be the juncture where investors acknowledge poor US economic data and the reality of a slowdown. The US housing market, which was the beacon of light last year, has become a nervous issue after new homes sales showed declines and first-time home buyers were absent from the action.

The weather may have attributed, but if we dig deeper the revelation was the bulk buying last year, were it was mainly by institutions.

The slowdown in home price appreciation and the rising mortgage rates has added pressure. The other factor highlighting uncertainty is consumer confidence, which is dropping more than forecast in February from 79.4 to 78.1.

The bad news may have caused a pause in the bull market. It is not nearly a reversal of the trend.  Given the heights the US equity markets are currently at, it is unsurprising for investors to be cautious. The valuation of US stocks is still shy of its peak back in 2009 and the S&P 500 trading is at 60%, below the current levels. 

Asian indices will have to battle through the uncertainty of global growth. Any significant slowdown in demand from the US, Europe and China would have a direct impact on Asia.  

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.