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Asia morning update - biding time

The fragility of global equity markets in the face of on-going uncertainties over growth and US-China trade dispute remains. Ahead of the heavyweight events next week, we are again finding oscillating markets.

Contempt on Wall Street

Sandwiched between early hopes and the unveil of a barrage of updates in the coming week, it may be no surprise that we are finding markets taking a breather this week. Evidently, there had also been various items at the start of the week to induce contempt within markets after the good run we have had thus far.

As it is, US markets returned from the Monday holiday, reacting in dismay towards the global growth picture and the conflicting updates on the US-China trade issue. The string of reminders of slowing growth momentum from the Chinese Q4 GDP on Monday to the IMF downward revision of global growth had been pinpointed as the causes for the price reversal this round. Meanwhile, reports of US turning down China’s offer for preparatory talks induced jitters in markets, though this was later cleared by White House’s economic advisor Larry Kudlow. Ahead of the January 30-31 trade talks in Washington, the picture had also been slightly mired by the expected request from the US to Canada for the extradition of Huawei’s CFO. The deadline, as many have noticed, had been set right at the start of the trade talks, giving the market quite a story to make out of this, thus one for the sentiment watchers. This remains one contentious issue that had been difficult to disentangle from the greater trade scuffle between the two countries.

Tuning back to prices, one would note the reversal across key indices including the likes of the Dow and the S&P 500 index with the drop of more than 1.2% on both. The comprehensive S&P 500 index notably submerged once again below its 50% Fibonacci retracement level, though this is likely to be a pause ahead of more direction-inducing elements next week. Across the week, US tech earnings such as Apple, the Fed meeting, US Q4 GDP and the instrumental US-China trade talk would all unfold. Coinciding with the month’s end, it all look set to be a perfect storm for markets should we yield unfavourable responses. Immediate support at around 2568, which is where the moving averages are meeting, one to behold with any dips below to suggest this could be more than a pause in markets.

Mild risk-off sentiment

Against the negative backdrop, we are finding Asia markets following suit with a dip across the board, though of a smaller magnitude compared to their US counterparts. The picture is one of moderate risk-off sentiment as US futures held flat. Notably, Japan’s trade data released this morning found disappointment across all components, closing off the 2018 data in red for the first time in three years. Bank of Japan meeting conclusion will be due today, one for us to watch, though no change is expected to monetary policy. Inflation forecast revision would still be due.

Yesterday: S&P 500 -1.42%; DJIA -1.22%; DAX -0.41%; FTSE -0.99%

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