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The balancing act

The way that prices have been moving in US markets, it seems to be telling us that the market clearly does not want to err on either side of being too bullish or bearish in this “wait-and-see” climate under President Donald Trump. 

S&P 500
Source: Bloomberg

This "wait-and-see" climate has however allowed performance earnings reports and other macroeconomic influences to shine through.

Between price levels at 2,200 and 2,300 has been where we have found the comprehensive S&P 500 index for an extended duration. The index had largely been holding flat in the absence of a “Trump-trigger”. Tuesday had been no different with prices moving a mere 0.02%. Balancing prices had been the better than expected earnings and the drag by the energy sector.

Crude oil prices nosedived overnight with WTI futures declining from $53 per barrel (bbl) to sub-$51.50/bbl levels into Wednesday morning (Singapore time). Driving the dip had been the sustained build up in US inventories. The American Petroleum Institute (API) arrived with crude inventory numbers that exceeded the previous week at 14.2 million barrels, capturing the market’s attention.

This overshoots the market consensus for the official EIA report at a 2.5 million barrel, due in US hours today, and casted a gloom on prices ahead of next week’s OPEC report. 

Asian markets could see less influence from overnight trades, though the slide in crude oil prices is likely to weigh on the energy sector in the day. Early movers, KOSPI and Nikkei 225, saw mixed performances shortly after the open, the latter a result of the USD/JPY reversal. The local STI had slipped a day earlier, weighed ahead of earning release by Singapore Airlines.

In line with the weak expectations, the local carrier saw earnings slump. A softer outlook painted for the remaining of the year by the group certainly does not bode well for prices moving forward.

On currencies, the USD index inched up overnight with growing uncertainties in Europe weighing on the Euro. We have seen a series of foreign reserves data from Asia on Tuesday and the trend had been mixed. What drew the attention had been the slide for China. China’s foreign reserves, a telling indicator of the PBoC's eagerness to stem the yuan decline, had slipped past the $3 trillion mark last month.

The breach of the psychological level raises concerns, though the authorities had done their part downplaying these concerns by stating that fluctuations in foreign exchange reserves is normal. With the USD inching up since the start of the month, the next release would be of interest.

Early morning data from Japan came in showing Japan’s December current account balance moderated for a fourth consecutive month. The day ahead will have markets watching for Bank of Thailand and Reserve Bank of India’s monetary policy decisions, the latter potentially shifting rates. 

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