Asia market morning update - dovish Fed

A dovish Fed coupled with more concerns on US-China trade relations placed a strain on US markets, though Asia markets are finding some relief from the benign stance.

Source: Bloomberg

Fed seeing no hike in 2019

A repeat of the European Central Bank’s dovishness ignited dip for markets was seen following the Federal Reserve meeting overnight. Certainly, the Fed had stuck to the dovish expectations, aiding markets on the climb with the release of the meeting decision and statement. That said, following the digestion of the meeting materials and Fed Jerome Powell’s press conference, the overt dovishness appeared to have tipped markets over.

The Fed lowered 2019 GDP view to 2.1% from 2.3% alongside a steeper drop for 2020 to 1.9%. This is while most of the Fed members saw the warranting of no further hikes for this year. Most importantly, Fed Powell noticeably highlighted the patient stance to markets but had also alluded to the possibility of seeing an easing in the next move with his comment on ‘The data are not currently sending a signal that we need to move in one direction or another’ which had perhaps taken markets by surprise. According to the CME FedWatch tool, the market is now viewing the probability of a cut by the end of 2019 at one in three chance, approximately 10% higher than prior to the meeting.

US Dollar Basket (SD1)

In turn for markets, this had taken a stampede on the US dollar strength as the US dollar index fell through 96.0 and the previous low in February when last checked. Prices can be seen hanging at the uptrend support, threatening a firm break below, one to watch. To some extent, the Fed’s latest flexibility could be the intent to leave room for politics to play out amid items such as the uncertainty in US-China trade weighing on the economic outlook. The insistence on data to lead rates nevertheless remains for the Fed and as such, any resilient economic indicators showings could still help to keep king dollar afloat.

Tariffs concerns to add

As for the equity market, US indices had largely erased gains on Wednesday though the dip had been slight. President Donald Trump’s note that tariffs will likely persist until compliance can be confirmed on the US-China deal further dampened markets. This comes against hopes for an immediate lift to tariffs on both sides with the agreement. Alongside the Fed concerns, the likes of the S&P 500 and Dow and sunk 0.29% and 0.55% respectively. One can argue that prices remain largely supported. Amid the vacuum of leads in the day, look to Friday’s release including the preliminary March Markit manufacturing PMI on the health of the economy.

US 500 Cash ($10)

Asia open

Amid the benign stance from the Federal Reserve, Asia markets looks to be retracing some of yesterday’s losses instead. While Japanese markets remain closed, the weakening of the US dollar overnight had helped to shore up sentiment for the Asia region. This had seen to early movers such as the South Korean KOSPI charging ahead while the likes of the local Singapore market partook with mild gains.

Separately, this morning saw Australia’s employment disappointing at 4.6k additions in February compared to the consensus 14k. The Aussie dollar cheered on the implication for the monetary policy as prices ticked higher from post Fed levels to 0.7160 when last checked. The ASX 200, however, had taken this in a positive light falling past the 6150 support. Watch the slew of Asia central bank meetings today for influences on the domestic markets.


Yesterday: S&P 500 -0.29%; DJIA -0.55%; DAX -1.57%; FTSE -0.45%


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