CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

ASX 200 shudders as China-Australia relations deteriorate even further

Asian trade returns to normal transition as activity lifts in the region’s stock markets, ASX200 and AUD/USD shudder as China-Australia relations deteriorate even further and stock indices looking at a mixed open tonight.

Trade in Asian markets has returned to normal today and that’s come with a big uplift in market activity. Price in action in the region’s indices has been mixed overall, with a lack of a clear and overarching narrative meaning the benchmark stock indices have traded according to their own domestic or technical factors.

AUD/JPY stocks have surged higher, in large part reflecting the weakening Yen during the period of the country’s public holidays, but the Chinese stock market has taken a spill, though remains well entrenched in its recent and quite stubborn trading range.

ASX 200 trades weak

The Australia 200 has traded weaker from the get-go, after US stocks late swoon seemed to spill into Australia’s stock market. It’s been a broad-based decline, with the index taking a 0.7% spill at time of writing, led by a swoon in Aussie tech stocks, after a similar bout of weakness in the tech names on Wall Street last night.

Local shares, along with the Australian Dollar, shuddered today as headlines hit the newswires about another deterioration in Australia-China relations. Coinciding conspicuously – as pointed out on Twitter by IG’s friend and Ausbiz producer Hans Lee – with speculation that the Australian government is intending to tear-up the Port Darwin lease, China’s National Development and Reform Commission announced it would be halting activities with Australia indefinitely, shutting down another avenue for dialogue between the two countries.

The AUD/USD took a spill right

The AUD/USD took a spill right to the 0.7700 mark following the news. Although probably not something that’s likely to impact Australian economic fundamentals in the near future, nor the profits of our big miners, with China still unlikely to go the “nuclear option” and slap tariffs on our major mineral exports, it is a sign that in the long-term, China is determined to decouple the two economies from one another, and probably reduce its reliance on Australian exports eventually.

On top of that, at the micro-level, the latest act of hostility from the Chinese is a sobering reminder to industries and companies target by Chinese tariffs that business conditions aren’t likely to improve any time soon.

You can trade the AUD/USD with IG by creating a trading account or log into your existing account to get started.

Looking to the session ahead

It's shaping as another positive open for European stocks – the marginally weaker Euro is probably helping there – but US stocks seem to be poised for another tech led dip at the open. The night’s news flow will be highlighted by the Bank of England (BoE) meeting tonight.

Although it’s almost certain not to change its policy settings, the all-important guidance will be the crucial point from the BoE tonight. As UK economic fundamentals improve, amidst the country’s world-leading vaccine roll-out, there’s growing speculation about when the BoE may begin to wind back its asset purchasing program. Any hint to such a move will give a shot in the arm to the GBP/USD, which is clinging onto the 1.39 handle currently, with the 1.40 mark the pair’s major resistance level in the bigger picture.

You can trade the GBP/USD with IG by creating a trading account or log into your existing account to get started.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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