Asia morning update - anticipating trade talks

Mixed but mostly flat markets are expected in Asia with the wait for the US-China talks carrying on. What seems like a vacuum of leads provides little, though the greenback strength had captured the market’s imagination.

Source: Bloomberg

Wall Street had mostly responded to corporate news and not much more in Monday’s session, finding the lack of direction amid the dearth of fresh leads. Mixed sectoral performance on the S&P 500 index saw industrials leading with the help of company specific news. Interestingly, alongside the tech sector, both had been amongst the strongest in terms of earnings beat thus far in the season. The S&P 500 index’s industrial sector ETF (XLI ETF) remains in anticipation of a breakout from the ascending triangle pattern, one to count on the US-China trade negotiation among others for direction moving forward.

Industrial Select Sector SPDR Fund

Certainly, there had been fresh news of US secretary of state Michael Pompeo looking to issue an ultimatum to nations engaging Huawei Technology Co. as a supplier, adding teeth to the relations. The focus, however, appears to be set ahead to the trade talks with the Asia region due to open mostly near neutral in anticipation. For the day ahead, a slew of tier-2 data had been queued, though finding little that would likely throw the market off track. Earnings, perhaps may be one to garner stronger interest instead. And across the likes of markets such as the local Straits Times Index, another day to watch the flatlining trade continue.

Despite the lack of prominent leads from various ends, the US Dollar strength had however been gathering, likely a result of the risk aversion attitude that continues to hold amid the concerns. Both the themes of slowdown in Europe and the US-China uncertainty appears to be propelling the evasion to the greenback with the relatively closed nature of the US economy appealing to concerned investors. While the Federal Reserve had turned dovish with the pause in their rate hike trajectory, the falling in line of central bankers around the world and the increased likelihood of rate cuts had altogether also boosted the US dollar. As seen for the US dollar index, prices had again touched resistance. Once again, watch the potential coming off of EUR/USD that could trigger further buying for USD, while a renewed government shutdown would provide resistance to short-term upsides.

US Dollar Basket (SD1)

Yesterday: S&P 500 +0.07%; DJIA -0.21%; DAX +0.99%; FTSE +0.82%


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