Asia market morning update - a broken deal?

The pressure looks to continue amid the trade concerns found within the market with heightened volatility a new normal this week.

Source: Bloomberg

Cautious on US-China trade

President Donald Trump’s tweets are at it again, noting that the Chinese vice-premier is headed to the US to ‘make a deal’ and therefore enthusing US markets for a good part of Wednesday. The last hour, however, eventually saw to gains being erased with the jitters still rife within the market. The S&P 500 index concluded in a mild red just above its 50-day moving average while the Dow closed near-neutral. China’s commerce ministry’s warning that Beijing will retaliate had in part contributed to the concerns, conflicting with President Trump’s more optimistic tone. Once again, whether this is posturing, it will be difficult to tell but the heightened sense of volatility for markets looks to keep its place at least for the rest of the week. The CBOE volatility index last seen closing 19.4 just as various haven assets have been kept afloat. Look to more headlines coming through on the trade talks to be the primary driver for markets.

Will he or will he not?

One of the most frequently asked questions this week had probably been whether tariffs will really be exchanged this Friday. Monday’s market action had been of scepticism, before a digestion of the possibility in later sessions took prices significantly lower for Wall Street. This is also with the official notice from both countries readying more tariffs.

After the episode of tit-for-tat tariffs war seen between US and China in 2018, there is a greater sense that the two largest economies in the world would still converge towards peaceful negotiations to resolve their issues. The odds are that even if new tariffs are implemented this Friday on US-China trade, both countries would find ways to de-escalate a situation that does not benefit both sides. The short-term need to protect both country’s sovereignty, thus the barring of teeth, should be expected in this new age of a more confrontational foreign policy with the US.

As far as the S&P 500 index’s total put-to-call ratio is suggesting, there had been a pick up seen in investors looking for protection though this is nothing compared to the December 2018 phase showing the wait-and-see attitude in place. Retail contrarian from the IG client sentiment indicator likewise suggests a bullish bias.

China ‘broke the deal’ according to Trump

Amid the backdrop of sustained jitters over US-China trade and President Donald Trump’s latest provocative remark that China ‘broke the deal’, heightened risk-off sentiment is expected into this Thursday session. This latest comment conflicts with his tweet as mentioned above and adds further uncertainty to an already tense situation. USD/JPY reacting this morning with a slide past the $110 handle to threaten the $109.77 strong support when last checked. Look to further downsides should China once again add fuel to fire.

China’s April inflation reading will be expected this Thursday awaiting signs of acceleration. Meanwhile Philippines’ GDP and Japan’s consumer confidence are also due alongside an expected rate cut from the Philippines central bank.

Yesterday: S&P 500 -0.16%; DJIA +0.01%; DAX +0.72%; FTSE +0.15%


This information has been prepared by IG, a trading name of IG 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.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 30
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

All trading involves risk and losses can exceed deposits. Trading CFDs may not be suitable for everyone so please ensure that you fully understand the risks involved. All trading involves risk and losses can exceed deposits.