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Asia markets find trade hope support

Politics will be a key driver this week for markets, and with the anticipation for an interim trade deal to arrive prior to the December 15 deadline, expect Asia markets to stay supported going into the week.

Source: Bloomberg

US data keeps the growth

A smorgasbord of data indicators had arrived since last Friday’s Asia close with the attention zeroing in on both the US jobs report and the Chinese trade data, telling of two very different situations. With the jobs report, a surprisingly positive reading had been seen on the non-farm payrolls front at 266k against the 180k consensus. Although average hourly earnings mildly disappointed at 0.2% month-on-month (MoM), unemployment had returned to historic lows at 3.5%, altogether an encouraging sign for US consumption and the economy alike. Notably, the manufacturing sector payrolls had likewise outperformed the market expectation following earlier concerns of the implication from the General Motors strike in October. Another bright spot had also been the preliminary December UoM sentiment release that surprised at 99.2, up from 96.8 and the 97.0 pencilled in by the market.

In turn for prices, both the comprehensive S&P US 500 and the Dow had charged on in the Friday session with the former seeing all but the utilities sector in green. Following the aid of the jobs report, the CBOE volatility index had likewise receded to the week’s low, a trend we had expected as well on the back of trade hopes. The US Dollar index, measured against six major currencies, similarly bounced on release of the data, easing some of the downward pressure.

Source: IG Charts

Chinese data spells urgency for interim deal

As said last week, an US-China trade phase one deal will be essential to keep the optimism going past this week with the December 15 deadline for further tariffs on $160 billion of Chinese imports to the US looming ahead. As far as the latest Chinese trade numbers had suggested, this pressure is on for some form of resolution to ease the pressure on the trade front. This was as the exports showed subdued readings of 1.1% year-on-year (YoY) contraction, the fourth YoY decline, and dragged by the export to the US. Across the board, however, exports had also receded in amount to other developed economies telling of the lack of demand and spell of the need for an interim trade deal to boost sentiment and confidence in the market.

Asia open

It will be a week focused on politics and central banks alike, though fresh leads from the latter may be few and far between. US-China trade deal hopes may keep the Asia markets broadly supported, as seen with the mild gains for early movers in the Asia region despite the lacklustre Chinese trade numbers. The Federal Reserve and European Central Bank (ECB) are unlikely to move rates in the week but attention will nonetheless be on their projections in the final meetings for 2019. Look to a quiet start to the week with few items expected out of the Asia session ahead of the German trade numbers to watch.

Friday: S&P 500 +0.91%; DJIA +1.22%; DAX +0.86%; FTSE +1.43%

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