Asia market morning update - Where will the data carry us this week?
Once again, it is a mixed but muted start for Asia markets to the week. Progress had been noted from both sides on US-China trade, but it could be data for markets to contend with after last week’s global equity markets decline.
US labour market underlying resilience
Friday appeared to have been a day of impossible data with both February trade numbers in China and payrolls reading in the US disappointing significantly. China’s exports saw the worst drop since February 2016 while the US payrolls additions had been the lowest since September 2017’s 18,000, altogether taking a hit on risk sentiment that had already been weighed all week on growth concerns.
Strictly examining the jobs report data on Friday, however, most would have noted the green shoots that had been seen with the improvement in both unemployment rate and wage growth, telling of a resilient jobs market. February’s unemployment rate dipped more than expected to 3.8% just as average hourly earnings surpassed expectations to accelerate to 0.4% month-on-month growth. As for the headline payrolls reading of 20,000 against the market’s 180,000 consensus, a 3-month moving average computation would suggest that despite this dip itself, the trend remain largely benign in comparison to the past three years. This had also been set against a backdrop of declining unemployment rate that had most presently pushed up the wage inflation, thus reinforcing the strong jobs market rhetoric.
The implication for markets would suggest that the US market may remain one to look at despite the slowdown that seems to be in discriminatory of region. The latest slowdown in hiring could provide some slack to come for wage growth, setting the Federal Reserve on track to remain patient on rates. This morning’s comments from Fed chair Jerome Powell had certainly reinforced that view, just as his Friday speech at Stanford University did.
Against the backdrop of growth concerns, Asia markets looks to again commence the week in a mixed but muted fashion. The indecision in markets, as it is, remains prevalent despite a chorus of positive reinforcements on US-China trade over the weekend. Officials, namely White House economic advisor Larry Kudlow and PBOC governor Yi Gang, spoke on ‘headway’ made in trade negotiations and foreign exchange agreements respectively. The fact is, however, that the market had largely priced in a positive outcome on trade and had turned its head to growth numbers instead that would make the slew of releases ones to scrutinise going into the week.
S&P 500: The headlines have it, the S&P 500 index saw the worst week this year last week, falling 2.16%. With the drop, prices had given up on the 200-day moving average as momentum flails. While the US-China trade issue remains one of the most important driven for markets, economic indicators would likely play a big part this week, as told above. Look to slew of releases including January’s retail sales, CPI and new home sales on various moving parts of the US economy for trade. From a technical perspective, the failure to break through the 2800 level could see prices back in idle within the consolidation zone until a breakout is seen.
STI: As with the above, Asian equity markets likewise remain in a state of consolidation, still awaiting fresh leads. Keep to the course of the rangebound trade.
EUR/GBP: As told in our week ahead, this week will be a huge one by means of politics particularly on Brexit. Parliamentary votes are expected that would most likely eventuate in the reduction of uncertainties over Brexit with the hopes of a delay to the March 29 deadline. Such an outcome could be one to provide the pound with further strength, one to watch for further downsides for the likes of the EUR/GBP pair. EUR itself may come under pressure with any disappointment in the series of data from the region.
Crude oil: Crude oil prices remain a play on growth and last week’s pressure build had been one to see it waver. Look to the OPEC monthly oil report for a boost, though the broad outlook remain one of growth concerns and could keep the consolidation around the likes of $65 for Brent crude going.
Friday: S&P 500 -0.21%; DJIA -0.09%; DAX -0.52%; FTSE -0.74%
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