Asia morning update - no US-China deal yet

Broad statements released by both US and China following talks have provided little strong reasons to cheer, though the optimism expressed may well buoy prices in the near term.

Source: Bloomberg

US-China relations to determine breakout

US markets continued on a fourth session higher, helped by expectedly-dovish Fed minutes. That said, the pace of gains lost steam as patience for the US-China talk conclusion gets tested. The scarce details later provided and the commitment to continue working together had likely been within expectations. Although, some bids on hopes for more details and progress have certainly been reversed in futures.

It does appear that we are in a new year with new sentiment to work with as everyone wakes up to a US and China that now wants to work together. With that, the realization of this overpricing of growth slowdown may be shifting trading strategies to start hunting changes in trend rather than just volatility. More so as the VIX finally slips past 20 as of Wednesday’s close. For the likes of the S&P 500 index, the moderate gains add to the 9.95% gain from Christmas eve’s close, keeping it in waiting at the uptrend resistance. Prices are also closing in on the 2600 level, one to watch as US-China negotiations formulates next steps.

US 500 Cash

Fed still data dependent

The key release overnight had been of little doubt the December’s Federal Open Market Committee (FOMC) meeting minutes, adopting a more dovish illustration compared to its counterparts after the meeting. While Fed members generally perceived that the economy remains strong, there had been a recognition of the downside risks within markets, perhaps a key difference from Fed chair Jerome Powell’s press conference speech.

Notably, however, the debate goes on with regards to the magnitude of the ‘some further gradual increases’ concurred by Fed officials. Judging from the addition of ‘some’ description and the interest to remove the guidance aspects of the statement, the key takeaway would perhaps be the fact that the Fed needs to buy time amid the data and market uncertainties. One should not be too surprise that the January FOMC meeting and the series to follow yields similar rhetoric. Such an outcome would be market-friendly, trickling down to Asia as well, perhaps clearing some of these Fed mispolicy concerns in the near term.

Asia market rangebound breakouts?

Amid a positive backdrop of a benign Fed outlook and a softer greenback, the leads are positive for Asia. That said, the as expected conclusion from the US-China meeting produces a mixed picture across Asia this morning. This had likely been underscored by technical reasons with the approach towards resistance across various indices. The local Straits Times Index had risen alongside Wall Street, coming to the resistance level of its recent consolidation range, seen at around the 3160-3190 levels. A couple of releases are anticipated in the session today including China’s factory inflation that would be of interest. Still, the attention rests on the progress of US-China negotiations moving forward as we await a breakout.

Singapore Index (SD10)

Yesterday: S&P 500 +0.41%; DJIA +0.39%; DAX +0.83%; FTSE +0.66%


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