Asia market morning update - busy week for markets

A broadly positive open is expected for Asia markets in this holiday-shortened week, a busy one nonetheless with key earnings and economic releases queued.

US Q1 GDP surprise

Wall Street concluded last week with the US Q1 GDP surprise seeing the strongest Q1 growth in four years, thereby boosting markets. Broad-based gains can be seen across the likes of the comprehensive S&P 500 index, though energy stocks had been afflicted by sector specific issues. While the headline growth figure does lay to rest concerns of Q1 weakness, a deeper dive into the contributors breed worries of sustainability into the next few quarters. The strong growth will nevertheless serve as a reassurance for the Fed as they meet this week to decide on monetary policy whereby no changes in rates or their patient stance is expected.

Meanwhile as told above, energy stocks are expected to present a drag on the broad market into the start of the week. Following President Donald Trump’s comments urging OPEC to raise production and thus lower prices, WTI futures was seen sinking to a 3-week low on Friday in response. Likewise, with Brent crude trading back below $72 per barrel. Look to the implication on Asia markets at the start of the week with more details below.

Asia open

Asia markets are expected to commence the week edging higher amid the positive leads on hand. Over and above the strong headline growth number out of the US, Chinese President Xi Jinping’s weekend comments at the Belt Road forum highlighting positive trade messages had likely fuelled rosier sentiment with regards to US-China trade ahead of continued talks this week. Look to regional markets to come online with gains despite the ASX 200 falling prey to pressure including upon the energy sector in the morning.

Notably, for the local Singapore market, the heavyweight DBS which reported Q1 earnings ahead of the market open was seen overshooting expectations. At $1.65 billion in net income, this represents a beat of more than 10% from consensus with interest income underpinning the outperformance. Look to a boost across the Singapore banking sector with this release and for the broad index as well this Monday.

Levels check

S&P 500: The question as to whether the S&P 500 index can inch further this week after last week’s record high would be with the next 30% of companies on the S&P 500 index due to report earnings. The Federal Open Market Committee (FOMC) meeting is expected to see the same patient stance from the Fed, thereby supportive, while data in the form of payrolls on Friday is due to remain broadly benign. Pressure for short-term retracement persists, though strong beats in the earnings this week may still keep this uptrend going, one to watch.

US 500 Cash

US Dollar Index: The greenback strength had been one to reckon with last week after breaking above the strong resistance to print a near 2-year high on the US dollar index. While the FOMC is expected to effect little changes to influence the dollar this week, the continued streaming in of resilient data may keep the US dollar afloat relative to various counterparts including the EUR and GBP

US Dollar Basket

USD/JPY: The golden week keeps the Japanese market away this week which would make for thin liquidity, perhaps placing the focus more strongly on this currency pair. Two-way fluctuations should may not come as a surprise particularly with various items on the table including US-China trade talks and Chinese PMI readings ones to influence the risk sentiment and the demand for the yen, one to watch.

USD/JPY Mini

US Crude: As told above, the deviation from the uptrend had been another case of President Donald Trump’s jawboning. WTI futures fell through to a three-week low on Friday before stabilizing around $62.90 levels. Profit-taking can be seen aggravating the fall though it remains to be seen if this marks a reversal with the likelihood of OPEC heeding the President’s call a question.

US Crude

Friday: S&P 500 +0.47%; DJIA +0.31%; DAX +0.27%; FTSE -0.08%


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