Asia morning update: Trump investigation hits market confidence

Asian bourses are likely to come online today, experiencing this drop in market confidence.

A 1.82% and 1.78% drop had been registered on the S&P 500 and Dow Jones respectively on Wednesday. The decline for the S&P 500 index had been the worst one-day percentage fall seen since September 2016. As mentioned yesterday, the political development had been an unwelcoming distraction for a market awaiting further policy updates from the new administration.

The latest development, in the form of the leaked memo from recently fired FBI director James Comey, further aggravates the situation. On the surface, the concern centres around how the matters might implicate President Donald Trump though impeachment as a conclusion may still be far-fetched at the moment. The focus upon the investigation could however retain the jitters within the markets and keep volatility abound.

Perhaps serving as one of the few welcoming developments had been the move in crude oil prices. WTI futures rose overnight to a high of $49.50 per barrel (bbl) before settling around $49/bbl when last checked at 8.45am Singapore time. A 1.75 million barrels drawdown in crude inventories boosted oil prices after Tuesday’s private API report pre-empted otherwise. Price trend appears to support further upsides when the OPEC convenes next week. The energy sector in the S&P 500 index had not escaped unscathed, but saw a less severe dip of 1.13% on Wednesday.

Separately, Japan’s Q1 GDP arrived this morning matching expectations. Quarter-on-quarter (QoQ) growth accelerated for a second quarter to 0.5% QoQ from 0.3% QoQ previously. Annualised number sees growth at 2.2% QoQ, beating the market’s 1.7% QoQ expectation. Notably, exports have been recognised as the main contributor to the growth result, raising the importance of the currency trajectory. With the bout of risk-off sentiment within the markets stemming from political and geopolitical risks, the fear would be that further upsides for USD/JPY may be limited.

Asian markets are expected to experience a lack of confidence and broadly sustain in decline in the day. Early movers in the region have been seen with substantial losses of over 1.0%, such as for the Nikkei 225 and TAIEX. Notably, the Singapore STI saw Singapore Telecommunications reporting a 1.8% rise in Q4 profit and a slight surprise on the upside for earnings per share (EPS). Despite the significantly weightage of the stock on the local index, the impact may be contained amidst the sell-off in global equities.

For the day ahead, look to more GDP data coming through from Philippines in addition to Bank Indonesia's monetary policy decision. UK's April retail sales, US jobless claims and leading index will also be items the market will be keeping track of.

Yesterday: S&P 500 -1.82%; DJIA -1.78%; DAX -1.35%; FTSE -0.25%