Trader thoughts - the long and short of it

Markets stand prepared for news today regarding the next escalation in the US-China trade war.

Source: Bloomberg

Although a time hasn’t been flagged by the Trump administrations, speculation is that an announcement may come before the end of Monday, US time. As it stands, it seems the White House will press forward with $US200bn worth of tariffs at a rate of 10 per cent on a selection of Chinese imports. This outcome appears to be gradually priced-in to markets, but what remains the major point of uncertainty is the likely Chinese response, with the prevailing view being that the go-ahead of the next round of tariffs will result in Chinese policy makers walking away from the negotiating table. If this comes to fruition, then it appears that markets all the way from Wall Street to embattled emerging markets face considerable downside risks.

SPI futures are pointing to a slight dip at the open for the ASX 200 of about 5 points. In the face of a day of thin trading courtesy of it being a Monday, combined with a bank holiday in Japan, the Australian share market did well to avoid the sell-off that gripped Asian equities yesterday. Fears relating to slower global growth showed up in the commodity sensitive materials sector and the growth-stock-heavy health care space, but despite this the broader Index managed to push higher to settle slight above last week's higher of 6280. Given the geopolitical risks constricting market sentiment today, a further push above that mark seems unlikely. But if clear air can be found, the next test for the ASX and its budding recovery sits around 6205.

Wall Street has demonstrated weakness not witnessed for several weeks. Having bucked the global trend for some time, price action in US indices overnight displayed signs that traders are becoming wary of the consequences of heightened hostility between the US and China. Tech stocks led run lower overnight, resulting in 1.43 per cent tumble in the NASDAQ and a 0.56% fall in the S&P 500. The benchmark S&P500 as a barometer for US equities is still in a relatively strong position, remaining close to the top of its upward trend channel. However, according to IG data, sentiment is against the index, with 60 per cent of traders short on the market, exposing the 2870 support level as a noteworthy pivot point.

Trade within the broader Asian region to start the week has proven a dour affair. The trade war has cast a shadow over Asian indices, with any counter arguments around attractive stock valuations, or planned intervention from policy makers doing little to staunch sell-offs in these markets. The CSI300 is primed to hit new lows, opening today's session 13 points above its 52-week low, and with futures markets indicating a near 1 per cent drop at the open. The Hang Seng is showing some resilience, following a day that saw that index unwind much of last week's recovery rally. While the interesting one today will be the Nikkei, which comes back on line after a public holiday yesterday and is showing signs of a noteworthy jump at the open despite a safe-haven play into the Yen overnight.

The bearishness weighing-on major developed markets will keep pressure on vulnerable emerging markets. Fears that the Chinese economy may falter were behind the renewed sell-off, driving emerging market equities down 1.2 per cent yesterday. Losses in emerging market currencies were relatively contained considering this, but that was largely owing to a weaker greenback. India’s Rupee suffered a fresh bout of selling, after Indian policy makers efforts to stabilize the country’s financial markets failed to assay investors’ concerns about financial stability in the Indian economy, translating into increased selling pressure on currencies ranging all the way from the Philippine Peso to the Turkish Lira.

The instability in emerging markets coupled with the effects on global growth of the US-China trade war has hit commodities and prompted a play into safe-haven assets. Copper prices maintained its downward trend to start the week, while oil prices also appeared to manifest demand-related concerns. The Bloomberg Commodity index was down 0.4 per cent at the end of the North American session, portending further losses to materials stocks today. Gold prices rallied back towards resistance at $US1207, as traders sold out of the US Dollar and avoided a play into US Treasuries, preferring to park safe-haven funds in the JPY, EUR and GBP. The trade dynamic led to a paradoxically steady AUD/USD overnight consequently, trading at around 0.7180 for much of the overnight session, though it must be noted the local unit slipped against most other major currencies.

The major event today during the local session will be this morning’s release of the minutes from the RBA’s most recent meeting. Few surprises are expected from the minutes, with recent economic data doing most of the talking for the Australian economy of late. Interest traders have kept wedded to the idea that interest rates will remain on hold until early 2020, something the RBA has done little to contradict in recent months. As is always the case, today’s minutes will be perused by traders for fresh insights into the hot points relating to the domestic economy’s health: this time around, that will likely come in the form of discussion about out of cycle rate hikes from the major banks and concerns about the strength of Aussie households. A major response to today’s news looks unlikely but watch for moves in the Australian Dollar with the realms of support at 0.7150 and resistance at 0.7200.

Deze informatie is opgesteld door IG Europe GmbH en IG Markets Ltd (beide IG). Evenals de disclaimer hieronder bevat de tekst op deze pagina geen vermelding van onze prijzen, een aanbieding of een verzoek om een transactie in welk financieel instrument dan ook. IG aanvaardt geen verantwoordelijkheid voor het gebruik dat van deze opmerkingen kan worden gemaakt en voor de daaruit voortvloeiende gevolgen. IG geeft geen verklaring of garantie over de nauwkeurigheid of volledigheid van deze informatie. Iedere handeling van een persoon naar aanleiding hiervan is dan ook geheel op eigen risico. Een door IG gepubliceerd onderzoek houdt geen rekening met de specifieke beleggingsdoelstellingen, de financiële situatie en behoeften van een specifiek persoon die deze informatie onder ogen kan krijgen. Het is niet uitgevoerd conform juridische eisen die zodanig zijn opgesteld dat de onafhankelijkheid van onderzoek op het gebied van investeringen wordt bevorderd, en dient daarom als marketingcommunicatie te worden beschouwd. Hoewel wij er niet uitdrukkelijk van weerhouden worden om te handelen op basis van onze aanbevelingen en hiervan te profiteren alvorens ze met onze cliënten te delen, zijn wij hier niet op uit. Bekijk de volledige disclaimer inzake niet-onafhankelijk onderzoek en de driemaandelijkse samenvatting.

Find articles by writer

Een artikel zoeken

Form has failed to submit. Please contact IG directly.

  • Ik stem ermee in dat IG of andere bedrijven van IG Group mij mogen informeren over hun handelsideeën, producten en diensten via e-mail.

Mijn toestemming is vrijwillig gegeven en kan op ieder moment worden ingetrokken. Een dergelijke intrekking van mijn toestemming heeft geen effect op de rechtmatigheid van de verwerking van data die voorafgaand aan een dergelijke intrekking heeft plaatsgevonden. Voor meer informatie over hoe u gebruik kunt maken van het recht op intrekking of hoe we uw gegevens kunnen gebruiken, verwijzen we u naar de privacykennisgeving en toegangsbeleid en naar de informatie over verwerking van gegevens.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 74% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder. Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren. Opties en warrants zijn complexe financiële instrumenten. Uw vermogen loopt risico. U kunt uw geld snel verliezen. CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.