Asia market morning update - growth in focus

The series of aggravating factors for growth concerns continues to gather, the latest from the eurozone, setting Asia markets up for synchronised decline into the end of the week.

The list of concerns on growth grows

It had been another day for the bears with the European Central Bank (ECB) partaking the downward revision in growth forecasts and adopting a magnitude that had perhaps been greater than expected, thus a toll on the market. This adds on to the list this week from China’s lowered growth targets, Australia’s Q4 GDP disappointment to the most recent reflection from the Fed’s beige book, altogether painting a rather bleak picture on growth once again.

No surprise that the direction had been down across markets overnight as the Dow kept the trade firm below the 76.4% Fibonacci retracement level and the S&P 500 index sank further away from the 2800 level. Watch the likely consolidation for the latter still within support 2648.7 and the 2800 level in light of the lack of impetus both from a fundamental and technical perspective.

EUR pressure

While the market widely expected a downward revision in growth from the ECB, the central bank had perhaps taken the extent a notch further than expected. The deets goes with 2019 growth forecast falling through to 1.1% from an earlier 1.7% while inflation also saw a sharp downturn to 1.6% from 2.1%. Meanwhile the ECB had also issued guidance on rates to stay put ‘at least through the end of 2019’ in line with the reassessed outlook. Liquidity measures kicked in earlier than a plausible April announcement with news of the new TLTROs breaking.

The effect had been a hard whack on the euro as EUR/USD fell through 1.12 to trade below the level into Friday morning here in Asia. No surprise if this downtrend continues to gather pace with any ECB adoption of further dovishness. As discussed previously, the shift in forward guidance from the ECB is expected to be a key force for further EUR downsides. There had been the expectations that the ECB may want to retain flexibility in light of the incoming leadership change, though that appears to be something abandoned as of now with the downturn in outlook. Look to the June 2017 lows at around 1.115 ahead of the 1.10 figure.

Asia open

A synchronised decline for the Asia markets is expected into the end of the week, underpinned by the gathering of growth concerns seemingly manifesting across all regions this week. Early morning Q4 final reading of Japan’s GDP had arrived better than expected but to little effect. Regional markets would be keeping a close eye on February’s trade numbers out of China instead. As told, the consensus is for exports to sink into year-on-year declines while the trade balance wanes, one that would not bode well against the backdrop today. Look to the release ahead of US’ jobs report tonight as the key releases.

Yesterday: S&P 500 -0.81%; DJIA -0.78%; DAX -0.60%; FTSE -0.53%

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