Asia morning update - what matters for markets

Wall Street climbed for a fifth consecutive session, sustaining the positive tone, though the journey had not been without its turbulence overnight.

Source: Bloomberg

As we examine the items that matter for markets, the broadly positive tone looks to keep the Asian region going.

Earnings concerns

Despite the resilience that carried through from Asia on the back of US-China trade optimism for Thursday, US markets commenced the session tripping over the poor showings from retailers. With growth being a lingering concern, the lowered guidance and weak December sales performance from retailer giant, Macy’s sank prices early in the session. The relevance of retailers is of little doubt pertinent to growth showings with consumption taking the lion’s share of GDP count. That said, it is perhaps worth remembering the fact that this is set against the backdrop of moderating but strong consumer confidence and positive retail sales growth. Moreover, the shift away from traditional retailers had long place these names under scrutiny. The preliminary January University of Michigan will be updated tonight.

The bigger concerns may instead come with the commencement of the earnings season next week in the US starting with the big banks that could induce further volatility to the good run thus far, one to watch.

Fed support

The wind beneath the wings for markets overnight had once again been Fed talks as Fed chair Jerome Powell’s second speech of the year proved equally consoling for previously dejected market. Trailing the footsteps of the December Fed minutes release, the affirmation from Fed Powell with regards to the ‘patient and flexible’ outlook on rates injected another shot of confidence into Wall Street. This had allowed both the Dow and the S&P 500 index to conclude with a fifth consecutive session of gains for Thursday.

Noticeably, the S&P 500 index traded at hair’s length to the 2600 handle, certainly one to watch tonight. December’s CPI release may hold the key here for today’s session as the Fed’s evident preference for being data-led would find this being a critical indication. Amid the lowered oil prices, the headline figure finds little conviction for upside surprise though the same may not be said for the core reading. Look to the release today for both breakout for equity indices and any corresponding downsides for the greenback.

Asia supported

A light data day is anticipated for the Asian region that would continue to be carried by the US-China trade optimism. It seems that the lack of details from the post talk statement from both US and China had not fazed markets in the renewed conviction for conciliation between the two sides on trade. The backdrop casted in the US had also been supportive with the Fed talks benign for Asia markets and the issue of government shutdown still treated largely as noise.

Following Australia’s retail sales surprise, look to some tier-2 release in the region, though the highlight is with the US session’s inflation reading.

Yesterday: S&P 500 +0.45%; DJIA +0.51%; DAX +0.26%; FTSE +0.52


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