Asia morning update

Weak sentiment post Wednesday’s Federal Open Market Committee (FOMC) March meeting minutes appear to abate and Friday sets the stage for the key US payrolls report and the outcome from the Trump-Xi meeting.

US Flag
Source: Bloomberg

US markets were seen recovering slightly from the Fed minutes pressure yesterday. Prices had nevertheless been seen in a consolidation range of late despite the movements. Leading gains on the comprehensive S&P 500 index had notably been the energy sector with 0.80% gains. A steady rally for oil prices was seen in the overnight session, erasing losses from the disappointment post US EIA report yesterday.

The market appears to have returned the focus to the output curb extension by the OPEC, placing their focus on the bigger producer bloc. This has helped WTI futures back above $51.50 per barrel (bbl) into Friday morning and certainly back into the earlier trading range of between $51.50 to $54.50. US rig count and CFTC commitment of traders report are scheduled for the end of the week. However, in this sentiment-driven environment, I would not be surprised should the market once again discount the US reports and hold their position in anticipation of the OPEC curb extension.

WTI futures

For markets, Friday continue to hold its charm with several items to potentially sway prices. After the release of strong private payrolls figures on Wednesday, Bloomberg’s survey has shown an upward shift in the median consensus for Friday’s payrolls to 180k. The degree in which the final figures deviate from the consensus would make interesting market leads. While the bias appears to be on the upside for US dollar and markets from the data, the meeting between US President Donald Trump and China President Xi Jinping remains a surprise factor. Formalities have been exchanged in the first day between the two leaders. The second day is when the two sides are expected to delve into more market moving issues. Any tense outcomes could jeopardize potential gains for markets from positive economic data.

Asian markets could see mixed performance into the end of the week. With US and China being two of the top trading partners for most countries in the region, the outcome could be a primary driver for markets. As such, markets could find themselves in consolidation, awaiting cues. Notably, we have seen the Nikkei 225 slipping past the support at approximately 18,800 and could really find this morning’s USD/JPY up move helping prices return to the consolidation range. The sentiment among IG’s clients show about three quarter holding long positions this morning, suggesting we may still see a false break. 

Yesterday: S&P 500 +0.19%; DJIA +0.07%; DAX +0.11%; FTSE -0.39%

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