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Asia morning update: Energy stocks to lead gains

Positive pre-Independence day markets provides moderate optimism for the Asian region on Tuesday, though the light market expected for the US session ahead could see lower trading volumes here in Asia as well.

Oil Pump
Source: Bloomberg

Oil leads

Synchronised gains for both US markets and the US dollar was seen overnight with optimism channelled to the markets at the start of the week. A near 3-year high seen for the US ISM manufacturing index had really been a continuation of the data outperformance seen from last Friday. The manufacturing activity data, coupled with the anticipation of Wednesday’s Fed minutes and Friday’s labour market update in the US, sets both the abovementioned markets on stronger footing at the start of the week.

Specifically, the USD index was seen trading above 96.00 Tuesday morning here in Asia and certainly seem to be relieved of the strong selling pressure from last week though the real tests comes later in the week.

Meanwhile, the shortened trading day within the US, ahead of Tuesday’s Independence Day, saw mostly mixed performance for markets. Key US indices had nevertheless managed to clock gains helped by strong performance within the energy and financial space. The S&P 500 index added a moderate 0.23% while the Dow Jones saw a strong 0.61% lift for prices. The NASDAQ had remained weighed by the IT glut.

It has been interesting to note that the S&P 500 index’s energy sector had clocked four consecutive sessions of gains as of Monday, the longest streak seen since February. This has been set against the backdrop of a seemingly strong recovery in crude oil prices with WTI futures crossing the $47.00 per barrel mark overnight. From a price perspective, the push for prices back to the consolidation range may mean more fluctuation to come as higher prices risk inviting more US rigs back online, especially after last week’s progress of seeing a slight decline.

US crude

US Crude Oil 040717

Asian markets

For the day ahead, Asian markets are poised for mild gains, taking after the lead from overnight markets and supported by the sustained climb in energy prices. Early movers in the region have been seen with mixed performances thus far. A lack of tier-1 data may mean that traders could find little to derail the anticipation for key US releases in the latter half of the week.

Focus ahead to the Reserve Bank of Australia’s meeting today with no expected change in interest rates. Against the backdrop of shifting rhetoric from advanced economies central bankers, there has been some chatters on whether we could see the RBA jump on the bandwagon. The wider market however remains aligned with a status quo outlook from the Australian central bank with the housing market still a concern. A relatively quiet post-Asian session is expected with some appearances by ECB members expected.

Yesterday: S&P 500 +0.23%; DJIA +0.61%; DAX +1.22%; FTSE +0.88%

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