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A risk-off atmosphere appears to have gripped the markets overnight and concerns continue to surround automakers in the United States. March vehicle sales undershot market expectations at 16.53 million based on data consolidated by WARD’s automotive group. This marks the worst performing month since February 2015, adding weight to US benchmark indices before the Q1 earnings season kick into full swing. The situation had certainly been aggravated with below-expectation final figures for March Markit manufacturing PMI and February construction spending.
The highly watched March Institute of Supply Management (ISM) manufacturing PMI, however, came in line with consensus at 57.2. Certainly we have emphasized the importance of data points in the absence of policy leads for this market that had rallied strongly on sentiment. Friday’s March non-farm payrolls (NFP) could really be the pinnacle of influence for US markets this week.
This risk-off start to the second quarter had been apparent in more than one instance. While the USD index had largely held flat with cross movements between EUR, GBP and JPY, gold had been an apparent gainer. Gold prices, supported above $1240 lately, but had picked up to trade above $1255 on Tuesday morning. Certainly a reaction had been seen towards the metro bomb at St Petersburg which pushed prices up by about 0.50% to $1253 levels. Prices continued to inch up further this morning in reaction towards the sustained risk-off sentiment in the market.
Moving forward, risk appears to be on the downside for the USD in the lead up to the Fed minutes, although once again, the NFP could be the wild card factor. That said, gold has been well supported and the slew of political risk in the month of April should help this trend.
Joining China and Taiwan markets on holiday will be Hong Kong and Indian onshore markets for Tuesday. Things have been rosy for the Asian region on Monday, though the cautiousness overnight could infect the region. Particularly, the local Straits Times Index (STI) had touched a fresh high since 2015, but continue to see 3200 as a strong barrier to any further rallies.
Risk factors lie ahead in the form of US market reaction towards March’s NFP data and the first face-to-face meeting between President Donald Trump and President Xi Jinping. The latter is expected to have due influence upon Asian markets and I would not be surprised if traders choose to stay on the side-lines to ride out these events. Short term upsides could be limited. Expect pressure for Asian markets in the day with the Reserve Bank of Australia’s meeting being the main event.
Yesterday: S&P 500 -0.16%; DJIA -0.06%; DAX -0.45%; FTSE -0.55%