Asia morning update - glimmers of trade hope

The back and forth sentiment around trade remained a norm for markets as reminded by the unfolding of events on Thursday.

It suffices to say, however, that Asia markets would find the renewed hopes one to propel prices into the end of the week.

Thursday’s market action again brought home the point that growth remained the central concern for markets and the US-China trade impasse being a key input factor. Early signs of profit-taking on Wall Street were seen following the scrutiny on Chinese electronics manufacturer, Huawei, by the US over stealing trade secret. Likewise with earnings, serving as a health check on US stocks, Morgan Stanley’s deviation from trend brought about early selling that was eventually saved by the broad market rebound. This was with headlines highlighting that treasury secretary Steven Mnuchin had propagated easing tariffs being taken at face value, despite disputes later from the treasury department. In turn, markets had also responded in kind with all sectors on the comprehensive S&P 500 index rallying, led by the trade sensitive materials and industrials sector.

What should be brought to attention would be the movements for the Dow with prices seen in this rising wedge that had just attempted the key resistance level at the 50% Fibonacci retracement level. Amid the lack of retail sales updates this week, better than expected high frequency jobless claims had been one to cheer on Thursday. The focus ahead goes to the likes of industrial production and the University of Michigan sentiment in the US session whereby a surprise here could make for another attempt to break higher, more so for the Dow with little effects coming through from the latest Netflix disappointment and futures currently pointing north.

Asia markets look to relish in the latest indication of further interest from the US to resolve the US-China trade uncertainty. Besides the purported update on the abovementioned US treasury secretary’s suggestion, the interest to reopen talks over US-China chicken trade had been reported, encouraging this morning’s moves. Both the ASX 200 and the Nikkei 225 had set off in gains of approximately 0.6% and 0.9% respectively when last checked. While scepticism may well persist, and worries build ahead of Chinese growth figures next week, the driving force for intraday market action belong to trade. Notably, it is no surprise to find treasury secretary Steven Mnuchin supporting a softer stance in the trade dispute, though this is garnering greater attention at present with President Donald Trump’s evident support for a deal to eventually be established.

Separately, this morning’s Japanese CPI disappointed for the month of December, arriving with the key core reading at 0.7% year-on-year against the 0.8% consensus and the 0.9% November figures. Inflation as it is remains an elusive creature for the Japanese market. For what it is worth, this only further builds the short-term bids for USD/JPY as the risk-on sentiment picks up in Asia on trade hopes. This leaves little more to watch in Asia ahead of the US economic data for Friday.

Yesterday: S&P 500 +0.76%; DJIA +0.67%; DAX -0.12%; FTSE -0.40%

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