Asia morning update - cautious start to a busy week
A busy week for Asia markets finds the region in contemplation at the start despite the positive leads off Wall Street. Where we will be heading from here will be a tough call with the assortment of leads in store.
QT tapering hopes
While earnings played a key role, fresh headlines highlighting that the Federal Reserve had been weighing a potential earlier end to the balance sheet shrinking program provided Wall Street with a boost. As it is, the purchase of treasury securities in itself had no doubt been a monetary policy tool. The halting of which, seemingly suggested for a duration earlier than the market’s expectations, therefore performs the function of easing and had been music to the ears for the markets. All but the defensive consumer staples and utilities sectors contributed to Friday’s 0.85% gain for the comprehensive S&P 500 index. How the abovementioned intention could be telegraphed will be the question for this week’s Federal Open Market Committee (FOMC) meeting as the WSJ piece illustrated the contemplation that Fed members had been in on resolving the details and communicating them.
With the above said, the FOMC meeting had perhaps just risen in importance within the long list of items to watch as outlined in our week ahead piece. A confirmation of any earlier-than-expected tapering, by means of this year-end to 2020, could further enliven markets across US to Asia, one to watch.
Monday morning news of Apple’s supplier Foxconn significantly cutting jobs have dampened the positive mood off the gains from US markets, thus leading to the mixed start for the region. More importantly, however, the assortment of high impact events lined up this week seem to be inviting markets to approach with caution. While the Australia market remain closed on Monday for a market holiday, the Nikkei 225 and KOSPI had moved in opposing directions. Meanwhile the HSI and STI are due to see mild gains. A slew of central bank releases is expected this week, but it will be the likes of Caterpillar Inc.’s earnings release in the US session taking the limelight, serving as a bellwether for global industrials and a leading indicator for growth alike.
In light of the sting of events this week, it would perhaps be timely to assess the prices on some of the items we follow.
For the comprehensive S&P 500 index, the flatlining of prices in the past week had been apparent after the roller coaster ride through December and most of January thus far. Watch for the US-China trade talks, US GDP readings, FANGs earnings and the Fed meeting on where it would lead markets this week. Any significant disappointment that pushes prices past the 50% Fibonacci retracement level again could see the index susceptible to further downside risks.
Likewise across the pacific to most of Asia bourses such as the Singapore Straits Times Index, where trade had been hanging in the upper end of the consolidation zone. Prices sit awaiting a breakout from above, though over and above the abovementioned items, Chinese PMIs could pose headwinds to gains this week that may lock prices back within the consolidation zone.
Consequently for spot gold, look to how it moves as a function of the US dollar. The $1300 resistance holding strong, but a break above may well happen with any lift in risk sentiment this week.
Brent crude prices appear to hold this inverse head-and-shoulder pattern, waiting for further upsides but the true driver for prices remain with demand issue. Should China’s PMI disappoint, and US-China talks conclude without a positive rhetoric, prices may be susceptible to further downsides once again.
Friday: S&P 500 +0.85%; DJIA +0.75%; DAX +1.36%; FTSE -0.14%
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
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.