Asia market update - cautiously trading US-China trade

Once again, we see Asia markets head into a moderately lower start, trailing Wall Street with the sense of cautious around US-China trade. The session ahead, however, could be one tracking the FX market with the items to watch.

Evasion to safety

The back and forth in market sentiment continued to be the case against the backdrop of the uncertainty in US-China trade, among others. A day after the Trump administration granted the 90-day relief for US companies supplying Huawei, news that Chinese surveillance company may possibly be on the target board has returned a sense of wariness to investors. Seeing the reaction from China thus far, this will no doubt add fuel to fire.

With that, it is perhaps no surprise that the market had been playing it very cautiously. The overnight session had seen an apparent evasion to safety. Defensive sectors broadly fared better than the cyclicals on the broad-based S&P 500 index while the likes of USD/JPY slipped from the heights of $110.50 to $110.30 levels this morning. This preference for defensive stocks had likewise been the case when assessing the performance of the last 5-session period where the market sentiment wobbled alongside the concerns over Huawei.

After seeing prices on the likes of the S&P 500 index escape the downtrend, this consolidation may well sustain for some time until further clarity can be sought. The next juncture expected is none other than the June G20 meeting between the Presidents of US and China amid the lack of ongoing trade talks, though the likelihood of a deal being established then is faint.

Source: Refinity, IG

Source: IG Charts

Into the Asia open, look to a moderate decline across the region with the risk sentiment still leaning towards the risk-off end. As it is, early movers in the region including the ASX 200 and Nikkei 225 had receded 0.1% and 0.5% respectively, the former seeing the energy sector being the worst performer on hand. With crude oil prices having sunk to a 1-week low to $71 per barrel levels alongside a surprise 4.7 million barrels build up in crude inventories according to the EIA, the pressure will be on for Asia energy names as well.

For the day ahead, a slew of data are expected, though mostly coming from the Eurozone and US including the preliminary May Markit manufacturing PMIs. Politics may also have a stronghold for the market here in Asia as well as India announces their election results, one to watch for the USD/INR.

Watch the euro

As told above, politics will be a key driver in the coming sessions and perhaps more so for the EUR than most others. EUR/USD had been under pressure in this downtrend though finding some support around $1.114 at present. The awaited May Fed minutes provided little fresh interpretations beyond the patient stance from the Fed.

Moving into Thursday, however, we will find the European elections taking place that could introduce added volatility. While it may be some time before the results would be made known, the potential for populist parties to gain grounds adds to the downside risks for the Euro. German GDP and Ifo business index will also be due in the session ahead, items to watch for imperatives for moves.

Source: IG Charts

Yesterday: S&P 500 -0.28%; DJIA -0.39%; DAX +0.21%; FTSE +0.07%

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 30
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Updated
Change

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
China 300
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.