Asia market morning update - watching Chinese PMIs
Softer than expected, manufacturing PMI out of China sets the region up for decline. This is set alongside cautiousness ahead of the holiday across the wider region on Wednesday.
Another record close
A recap of the overnight action finds Wall Street chalking up another record close at the start of the week. This had been set against the backdrop of a relative rosy set of data releases including a pickup in consumer spending over February and March, in addition to relative flat inflation growth in the form of March’s core PCE reading. As with the GDP release, this once again invokes that perception of the goldilocks situation for the US economy aiding the climb overnight for markets to garner that fresh all-time high.
Some paring of gains ahead of Alphabet Inc.’s earnings release was seen with the caution rightly accorded given the decline afterhours from a revenue miss. This will be one to watch into the session ahead, but in light of the eventual near-neutral close, the overnight leads fail to amount to much for the Tuesday session in Asia. The session ahead will nevertheless be packed with a series of data updates including April’s consumer confidence data that should be an important guide for the market alongside earnings from the likes of General Motors Co. and Apple Inc., the latter due after hours.
Big week for the dollar
More importantly, it is the US dollar trajectory that is perhaps worth watching this week after the breakout last week. Softer-than-expected core PCE print saw to the US Dollar Index slipping at the start of the week, but the series of data including April’s consumer confidence figures and the labour market updates into the end of the week still offers plenty of opportunities for the greenback strength to make its mark. Not to forget, the Q1 GDP outperformance also has the market pondering a rosier outlook update from the Fed in the upcoming statement. Arguably it will be difficult to fathom a one-way US dollar strengthening move following the breakout last week, but the factors ranging positive data and equity market action certainly bodes better for the US dollar than many of its major peers.
For trade, however, look more closely to the EUR/USD with the eurozone Q1 GDP and German inflation and employment data due in the session ahead that would expose the pair towards further volatility with any surprises. Prices currently seen in a downtrend though coming into contact with the strong resistance at $1.1186.
Asia markets look set for a softer start to the session with the miss seen in the official Chinese PMI readings. April’s official manufacturing PMI arrived at 50.1 against the 50.5 consensus, which had also been the March reading. Remaining in expansionary territory, the number may yet represent a source of concern with the consideration of the surge in March. Look to the imminent Caixin manufacturing PMI to confirm the trend with the official figure, whereby the consensus is for a slightly improvement to 51.0 for April.
In light of the fact that most of the regional markets would likely be away on Wednesday, watch also for cautiousness into the session with the series of key releases including Apple Inc. earnings and the FOMC meeting conclusion all expected in the following session.
Yesterday: S&P 500 +0.11%; DJIA +0.04%; DAX +0.10%; FTSE +0.17%
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