Asia morning update: Double-whammy

Over and above the weight from Hurricane Harvey, the latest heightening of concerns surrounding North Korea’s firing of missiles is set to weigh upon global equity markets. 

US Trader
Source: Bloomberg

Watching breakouts

US markets were seen little changed on Monday, with investors still gauging the impact from a hurricane that may once again gain strength. Meanwhile US futures including the Dow and the S&P 500 were both last seen with losses of over 0.3%, digesting the latest escalation of tension over North Korea. It will not be a pretty sight in Asia this morning.

We have seen US 10-year treasury yields sank this morning, threatening the 2.12% level. Obviously, the latest addition to a series of missiles, fired by North Korea, has changed the story for markets today. The suspected mid-range missile took a trajectory that crossed Japan, a provocation unprecedented since 2009. Reactions in gold prices have not been slight with prices breaking from the recent consolidation range and topping the $1300 psychological level to print a fresh 9-month high.

Assuming the trend we have seen of late, reactions from the US would likely be the key driver for how prices trend in the near term. So far it has been twitter-silence. Japan’s Prime Minister Shinzo Abe is noted to be discussing the matter with US President Donald Trump, one to follow for reactions. USD/JPY briefly sunk to a low of $108.34, last seen around $108.80 levels. Watch for a firm slide below $108 should we do get harsh responses from the US that could stroke fear of further retaliations from North Korea. On the other hand, a decline of this tension may reach the precious gold metal first.

 

Asian gloom

Asian markets are set to see a synchronised decline with the ramping up of risk-off sentiment, underpinned by escalating geopolitical tensions. A deeper correction for the region may be seen with early movers having already led the way on the downturn. Neighbouring KOSPI and Nikkei 225 were last seen down 0.6% and 1.0% respectively as of 8.30 am Singapore time and may still have further room to slide with any escalations. The local Singapore market and Hong Kong bourse are expected to fare slightly better, though unlikely to escape this gloom.

Expect matters surrounding North Korea to be the key driver for markets today, but watch also for data including Hong Kong’s retail sales and US conference board consumer confidence figures today.

Yesterday: S&P 500 +0.05%; DJIA -0.02%; DAX -0.37%; FTSE -0.08%

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