Asia market update - US-China trade tensions continue

Heightening trade tensions continue to affect equity markets with the latest fallout surrounding China’s telecom giant Huawei one to weigh on Asia markets into a data-packed Tuesday session.

Source: Bloomberg

Chinese retaliation to bring more tariffs?

The pressure continues to build between US and China seeing the dispute over Huawei bringing on a tougher stance from China and dragging on market confidence. Over and above the effect upon Huawei’s suppliers such as semiconductor companies Intel and Qualcomm, other technology firms including the likes of Apple also retreated on Monday. The latter’s move had been a clear reflection of the worries over further escalation which could see to more products coming under the tariff drag. As it is, companies such as Apple had already been a victim of weaker Chinese demand and the sustained of tensions could derail some of the progress made in regaining sales in the country.

The notable comments on retaliation from the Chinese ambassador to the European Union meanwhile opens up room for further escalations to come. Addressing the Huawei item, the ambassador noted that ‘the Chinese government will not sit idly by’ and will act with ‘a necessary response’. Any retaliation here could close the gap between where the market currently stands and the next round of tariffs to cover all Chinese imports to the US, thus one to hurt the trade-sensitive sectors further. The technology sector on the S&P 500 index had seen to a 1.75% drop on Monday, likewise for the sector’s ETF (XLK ETF) with a pullback of more than 6.0% from its peak. The macro factor could keep the downward pressure on the XLK ETF that had already seen its downward momentum building, one to watch. Support coming in at around $72.15, where breached could see greater selling interests.

XLK ETF

Source: IG Charts

Asia open

Trailing Wall Street, Asia markets look set to see an intraday dip once again against the backdrop of sustained trade tensions. Early movers, the likes of the ASX 200 and Nikkei 225 chalking up a moderate red of around 0.4% when last checked. Look to the rest of the regional markets to fall in line with the dip.

Separately, the final reading of Singapore’s Q1 GDP arrived this morning with mixed showings. The year-on-year reading underscored the 1.5% consensus to print 1.2% while the quarterly number had been revised higher-than-expected to 3.8% QoQ. The Ministry of Trade and Industry (MTI) had also narrowed 2019’s growth forecast to the lowered range of 1.5% to 2.5% from 1.5% to 3.5% previously, perhaps little surprise currently given the showings in Q1 and the current uncertainty brought about by the latest round of tariffs escalations between US and China. USD/SGD though showing little reactions still trading around $1.3755 when last checked.

Look to a packed day ahead with the likes of Thailand’s Q1 GDP, May’s RBA minutes, Eurozone’s consumer confidence and US existing home sales among others.

Yesterday: S&P 500 -0.67%; DJIA -0.33%; DAX -1.61%; FTSE -0.51%


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