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Asia morning update - holiday week

Muted movements are expected for Asia markets that would likely find the Chinese New Year holidays a prevalent distraction for a good part of the week.

As noted in our Asia week ahead, a relatively quiet week sets ahead compared to the barrage of events we saw in the previous one. Alongside the thinned market on the back of the Chinese New Year holidays, a more rangebound trend for prices may well be the picture this week as the market continues to await trigger.

US jobs report strength

Leads from Wall Street had leaned towards the positive with earnings and January’s jobs report supporting equities. An evident surprise on the upside of 304K jobs added, compared to the 165K consensus, saw the market taking well to the release. This was despite the disappointment in average hourly earnings at 0.1% month-on-month (MoM) and tick up in unemployment rate back to 4.0%. Over and above the strong payroll addition shown, the strength in the ISM manufacturing reading at 56.6, beating the consensus, served as another data point to reflect the resilience of the US economy. These figures may well dispel some of the worries over growth slowdown in the economy as the slew of items including the latest government shutdown shrouded markets. Still, the wait is for the series of delayed reading including retail sales data and Q4 GDP that had yet to see a planned release date for a check on the health of the economy. Thus, the muted response on Wall Street had ensued the Dow and the S&P 500 indices to keep gains within mild levels.

Asia open

Early movers in the region including the Nikkei 225 and ASX 200 had commenced on a positive note, both gaining 0.5% when last checked. The rest of the region including the Hang Seng Index and Straits Times Index on half-day operations are expected to see more moderate movements ahead of the holidays. This would nevertheless be gains with the positive US leads and the confirmation of services sector resilience in China following the Caixin services PMI surprise over the weekend. Watch Singapore’s PMI out today, ahead of the set of tier-2 US data, though it would be the State of Union address by President Donald Trump that could capture interest before markets reopen for Singapore on Thursday.

Levels check

S&P 500: The idling continues for the S&P 500 index caught between the 50% and the 61.8% Fibonacci retracement levels, though trading on the upper end of the range with the Fed’s support last week. While the 46% of companies reported Q4 earnings had delivered an adequate 71% beat in earnings, guidance came with hits and misses. The key overhang of the US-China trade issue remains in question, though the item could see little news with China away for the week. Look to further earnings this week for leads including Google’s parent Alphabet on Monday to lead prices.

HSI: The Hang Seng Index had been on the climb in the previous week helped along by the Fed, though prices again face resistance with the US-China issue kicked down the road. Expect muted movements for the market amid the lack of key events to influence, likewise for the Singapore Straits Times Index (below).

USD index: The greenback had managed to escape a break of the longer-term uptrend with the labour market and ISM reports helping to lift prices into the end of the week. That being said, with the Fed taking an evident dovish turn by pausing their rate hike trajectory, it does look like the US dollar may find little support from monetary policy. Still, sustained resilience in economic indicators may be one to keep prices above water.

USD/JPY: This would perhaps be one that holds the most rangebound of trends in light of the balanced view towards risk sentiment at present. Both US-China and Brexit influences are expected to take a break this week that could see trade around the 108-110 levels sustained.

Gold: The uptrend for Spot Gold holds with the US dollar wavering last week on the back of the Fed dovishness. As mentioned above, the risk sentiment towards the end of things may take a breather with little politics expected in the picture this week. Earnings, nevertheless, could influence the market’s view among others.

Brent Crude: The inverse head-and-shoulder pattern continues, with prices showing mild upsides to the end of last week. This had been helped with the tick down in rig count of 14 according to the Baker Hughes rig count and the broad supply picture. What could help prices take off remains the US-China resolution for the demand side of things, one to continue watching to the end of February.

Friday: S&P 500 +0.09%; DJIA +0.26%; DAX +0.07%; FTSE +0.74%


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