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Trade hopes lifting Asia markets

It looks to be another session with US-China trade hopes carrying the market following comments from President Donald Trump.

While the attention will soon shift to earnings, expect Asia markets to bask in this positivity this Tuesday.

Third time lucky for the S&P 500 index?

Following two weeks of mild gains for the S&P 500 Index, the latest 0.69% jump on Monday for the index had seen to a close above the 3000 handle, once again fuelling hopes for another record high. Aiding in the good run for the index had been none other than trade hopes as President Donald Trump noted that negotiations over an initial deal are advancing and a deal signing could be expected in Chile in November. Amid the lack of data and a relatively quiet start to earnings releases at the start of the week, the S&P 500 index can be seen making a third attempt at a break on the upside of the resistance around 3017-3025 levels. A clear break here would be significant and one to aid with the renewal of the long-term uptrend that had been kept intact through the recent spate of trade escalation.

The above said, however, a couple of items perhaps provide reasons for holding on to reservations here. Firstly, despite the improved intent from both US and China to establish some common grounds, the outstanding issues remain thorny items that have yet to be addressed and does not make the next phase any easier. On US-China bilateral relations, the expected passage of the Hong Kong bill through the senate further looms in the air that could see to damages for the fragile ties on hand and market sentiment likewise. Furthermore, we do also have a heavy week of US earnings in the docket with industrial names such as Boeing and Caterpillar in the lot. One would have noted that while the S&P 500 index have held up in the last 5-day performance, sectoral breakdown had shown that earnings had gradually taken over as a key driver. Financials and healthcare which found earnings outperformers last week is situated amongst the top while the likes of IT and energy, which analysts have regarded poorly in terms of earnings outlook, underperformed. Unless we continue to see a series of these outperformers coming through, the index may find greater volatility ahead. One to watch.

Asia open

While it may be difficult to assess the trajectory of Wall Street from here with the idiosyncratic factors of geopolitics, Asia markets would nevertheless be one to celebrate this window of positivity stemming from US-China trade deal hopes. Japan is away this Tuesday, but early movers in the region including the ASX 200 had seen to moderate gains at the start of the session. A relatively quiet data calendar lies ahead for Asia, but it will be the US session that should get investors looking to a series of earnings. UK prime minister Boris Johnson will also see his draft deal evaluated on a general principle basis, one for the British pound to track.

Yesterday: S&P 500 +0.69%; DJIA +0.21%; DAX +0.91%; FTSE +0.18%


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