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Asia morning update - trade talk still on, but when?

With trade and growth concerns busting sentiment into the end of the week, Asia markets look set for a session of declines, amplifying the uncertainties that remain.

The crux of the decline for Wall Street overnight had been with little doubt trade induced, making for poor leads for Asia markets into this Friday session. President Donald Trump noted overnight that it is ‘highly unlikely’ for his meeting with Chinese President Xi Jinping to occur in the coming weeks. Having made known previously via twitter that the deal will hinge on the two President’s meeting and with less than a month to the March 1 deadline, this admission thereby evoked fear within markets. The worries surround the uncertainties of a resolution to the likelihood of further tariffs in this on-again, off-again confidence with regards to a deal.

For markets, the key takeaway had once again been the substantial extent in which the latest rebound had rested on hopes of a US-China resolution. Certainly, news quoting officials did highlight that the two Presidents could meet shortly after the deadline. Furthermore, in this twist and turn of the US-China trade issue, the meeting next week between high-ranking officials may still bring surprises. However, until then, the current tone is expected to be outrightly poor awaiting something better to come along.

With the rejection ahead of the 200-day moving average on the S&P 500 Index, prices had slipped from the uptrend, seemingly headed into the consolidation mode. Having been loitering at the borders of being overbought, this comes with little surprises. Watch a breach of either the 50% or the 76.4% Fibonacci retracement level, with risks to the downside should the US-China resolution fail to be reached ahead of the March 1 deadline.

Separately, the pertinent concerns of growth had returned to the European continent after the European Union lowered growth forecast and the Bank of England (BoE) drummed up the risks from Brexit in their first meeting of the year. Downward revisions to growth had not been new with the IMF having done so just recently, citing weakness from the region. That said, even with the latest lowering of growth to 1.3% from 1.9% for the region and Europe’s largest economy Germany off to 1.1% from 1.8% this year, there is still some sense that growth could still disappoint, particularly with the kind of showings in economic data of late. The impact cascades directly to the euro that had so far been holding precariously against the greenback ahead of key support levels. Watch a clear break of the $1.13 level here for advanced to the next support level - $1.11, ahead of the $1.10 figure - in light of the current back drop.

Concerns brewing two folds, mostly from the US-China trade deal uncertainty, act as the drag on Asia markets into the end of the week. Early movers in the region including the ASX 200 and Nikkei 225 were last seen in red. Despite the risk-off sentiment, USD/JPY had mostly held steady, though the same may not be said with US treasuries and gold, the latter up slightly from last night’s levels. Amid the relatively quiet data day for Asia, look to the extent in which prices may decline. Most indices, including the Hong Kong HSI returning from the Chinese New Year holidays, however may find simply a lock back into consolidation, little changed in trend for prices.

Yesterday: S&P 500 -0.94%; DJIA -0.87%; DAX -2.67%; FTSE -1.11%

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