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Asia morning update: Cautious markets ahead of Thursday

Markets remain in waiting with the blend of activities set to take place on Thursday expected to affect key markets in both the US and Europe.

Trader
Source: Bloomberg

Asian markets could very likely sustain mixed performances in anticipation of the reactions towards the key events.

The leads

US markets could arguably be regarded as remaining in consolidation despite the decline cutting across most indices. On the comprehensive S&P 500 index, volume was seen rising slightly from Monday’s lows to find sellers bringing down the index down a moderate 0.28% on Tuesday. The energy sector had been the only significant gainer while most other sectors were sold, with caution likely occupying the market ahead of Thursday’s events.

Notably, prompting the interest in energy stocks in Tuesday’s session had been the uptick in crude oil prices. Prices were seen ticking up ahead of the private API inventory report, which later showed a 4.62 million barrel drawdown in crude oil inventories, suggesting that we might see an above-expected drawdown in the official DoE report today. The market can visibly be seen tracking more near-term movements, shrugging off the EIA’s short-term energy outlook report which cited a lowered forecast for 2018 US crude prices overnight.

Asian markets

This cautiousness ahead of key events could very likely persist into Wednesday. Safe havens plays have been seen since the start of the week with USD/JPY firmly crossing the $110.00 market to trade at over 1-month lows, gold prices hanging just below $1300 level and the dips in US treasury yields. Asian markets are expected to come online flat but could see retreat following the anxiety seen in US markets.

Reactions on Thursday may primarily be seen in EUR and GBP pairs and the EUR/GBP pair itself from European events. EUR/GBP have been seen oscillating just below the strong $0.88 resistance, awaiting the triggers. The official results from the UK election however holds an uncertain timing and could carry forth into Friday should we see a close result. For Asian equity markets, the key focus could be the reaction in US markets from former FBI director James Comey’s testimony that could potentially lift risk sentiment.

For the day ahead, Australia’s Q1 GDP would likely be the key focus in addition to China’s May foreign reserves update. The market is currently expecting a slight reduction in foreign reserves with the Chinese currency strengthening against several key major currencies in the previous month.

Yesterday: S&P 500 -0.28%; DJIA -0.23%; DAX -1.04%; FTSE -0.01%

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