Pockets of unrest to keep gains capped

Cautious moves on Wall Street was seen at the start of the week ahead of the year-end holiday season. 

Wall Street
Source: Bloomberg

However the slight gains could provide little optimism for Tuesday’s trade.

Overnight we have seen the President-elect Donald Trump acquiring the 270 votes from the Electoral College and securing his presidency. With the market expecting little disruption to the event, there were also little to cheer. A moderate 0.20% was clocked for both the S&P 500 index and the Dow Jones Industrial Average (DJIA) on Monday. Gains on the S&P 500 index was led by the IT sector at 1.07% and it was no surprise to see the Nasdaq inching up a tad higher at +0.37%. Nevertheless the slight gains on Wall Street are unlikely to provide much inspiration for the markets with pockets of unrest weighing on markets into Tuesday Asian hours.

A series of events were seen erupting and adding to the existing list of concerns. As the tensions between US and China look set to ease with the latter returning the seized drone as early as today, chaos was seen striking Switzerland, Germany and Turkey. Safe havens including US treasures and JPY saw their appeal pick up slightly in the morning. Gold prices had meanwhile remained flat on either side of $1140 with the dollar still supported.

Federal Reserve Chair Janet Yellen took to the podium of University of Baltimore on Monday and expressed that the current market is the “strongest job market in a decade”, sending the USD index up by approximately 30 pips. Her balanced speech highlighted views that were in line with the Fed Federal Open Market Committee’s (FOMC) recent improvement in projections while reflecting her cautious nature of highlighting challenges such as in productivity growth.

With the USD index up above 103.00 once again, concerns will be drawn towards Asian currencies in the day. Most notably, the attention had been on EMFX USD/MYR on Monday as the currency pair stepped up to fresh high since 1998. Similar to the reasons underpinning USD/CNY weakness, the strong US dollar had been the main driver for the movement in the currency pair. On the other hand, the trend in crude oil prices could provide a cushion for the ringgit moving forward.

The day ahead will have the focus on the Bank of Japan (BoJ) policy decision and monetary policy statement, likely to be released before noon (Singapore time). Improvements in high frequency indicators and the Q4 Tankan survey, Short-Term Economic Survey of Enterprises, would compel the central bank to keep matters status quo though we would watch for any upgrades to the economic outlook. Taiwan’s November export orders and Hong Kong’s November CPI composite will also be due in the day. 

Yesterday: S&P 500 +0.20%; DJIA +0.20%; DAX +0.20%; FTSE +0.08%

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