Asia morning update - trade talk enthusiasm

The hardened pessimism continued to show signs of letting up with Wall Street edging higher on US-China trade talks hopes, one to buoy Asia markets as well.

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Source: Bloomberg

‘A very good chance’

Against the backdrop of negotiations held in Beijing, the optimism from US commerce secretary Wilbur Ross who sees ‘a very good chance’ for a ‘reasonable settlement’ with China has kept the sun shining over equities on Wall Street. It is worth noting that the VIX had taken another progressive step lower towards the longer term historical average of 20, ending 21.4 on Monday at a near 1-month low. Correspondingly, the internals showed the sharp drop for the S&P 500 index’s put-call ratio, reflecting the receding of fear at present.

That above said, there certainly is no shortage of caution within the market despite the short-term uptrend that had been formed on US indices. This ranges from the focus on weak forward-looking components of the manufacturing gauges to the contempt over both supportive Fed and trade talk outcomes. Perhaps a sense of foreboding can be felt with the S&P 500 index’s approaching the downtrend resistance once again which would put the market to test. This is particularly with the Q4 earnings season landing in the US next week, expected to bring reports of slower earnings growth and potentially weaker guidance as we have seen surrounding Apple Inc. last week. Nevertheless, a break here could prove supportive for the market encumbered with overtly negative sentiment and likewise a divergence from the current trend. One to watch.

Asia markets

The multi jolts of aid across trade talk optimism and China’s reserve ratio requirement cut had been supportive of Asia markets on Monday and likely into the following session today. Comparatively, however, Asia markets had mostly been thriving in this state of consolidation despite the twists and turns that had been seen in the US. The likes of the HSI and the STI largely keeping to this rangebound trading that could very well go on for some time until a material change in US-China trade relations is seen.

Yesterday: S&P 500 +0.70%; DJIA +0.42%; DAX -0.18%; FTSE -0.39%

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