Asia Morning Update

The overnight markets have been rumbling noticeably with chatters of the Trump rally retreating. For the radiant Asian region, investors may be more than convinced to take some money off the table in the day. 

Indices
Source: Bloomberg

Daily chart of the comprehensive S&P 500 depicts a glaring bear candle, also the first 1-day percentage decline above 1.0% since October 2016, capturing the market’s attention. A breakdown of the sectors within the S&P 500 could perhaps best explain the situation as one would find the prime Trump-rally beneficiaries, including the financial, material and industrial sectors, leading losses. Specifically, the financial sector appear to be finding duo pressure from the Trump rally unwinding and dovish Fed discussions.

A slide of 2.87% for the financial sector on Tuesday makes it the worst 1-day percentage performance since the UK referendum. That said, the technical does suggest that prices have fallen to the trend line and that it could keep prices supported despite the pause. Investors have not entirely exited the market either, shuffling into the defensive utilities sector, which gained 1.41% on Tuesday. 

The currency market had correspondingly reacted in a similar manner, sinking overnight while the US fixed income gained favour in the risk-off atmosphere. The USD index was seen crossing the 100.00 level overnight, trading firmly below the level. Specifically, a sharp downmove was registered in the USD/JPY pair bringing prices to the lowest level since November 2016, last seen at $117.70 levels this morning. The better than expected export data from Japan had done little to help prices. For the Japanese market which had come under pressure since the start of the week, a close to 1.5% drop was seen at last check (8:30am Singapore time).

Early movers in the region had dipped into red and the Hong Kong and local Singapore markets are expected to fall in line as well. The pressure from overnight markets are likely to affect sentiment in the Asian region. Additionally, the sharp drop in oil prices overnight on the release of US private API report could play a part as well, expected to weigh on energy stocks in the region. Investors may be more than willing to take profit especially given the fact that many Asian indices have seen recent highs yesterday and concerns of a prolonged unwinding of the Trump trade may be brewing.

Data expected for the day ahead includes Japan’s January all industry activity index and key US home sales data in US hours.

Yesterday: S&P 500 -1.24%; DJIA -1.14%; DAX -0.75%; FTSE -0.69%

 

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