Asia morning update - US-China hopes
The highly watched US-China talks this week completed with intentions for further work ahead of the March 1 deadline and perhaps little details to cheer as of yet.
The focus goes ahead to the slew of releases in the day with manufacturing numbers out of both US and China to watch.
Where next for markets in February?
Wall Street concluded Thursday’s session mixed, placing a lukewarm note to the end of what had been a rather spectacular month by means of recovery. The question lies with where we are headed next as the consolidation goes on.
Following the dented sentiment in December, it does appear that all had been attempting greater kindness for markets ranging from the Fed, US-China rhetoric, to the market reaction towards US earnings. This had altogether contributed to the risk-on mood in markets with the Dow and the S&P 500 indices gaining 7.17% and 7.87% respectively. Sectoral movements on the S&P 500 index had certainly reflected the picture as cyclical stocks broadly performed better than the defensives as shown in our chart below. While it is a heartening sight for bulls to have prices supported above the 50% Fibonacci retracement level for a prolonged period for the likes of the S&P 500 index, the narrow-range trading keeps mum on where we are headed in a seasonally flat February. Certainly, the concern with regards to central bank tightening had largely diminished in the short-term with major central banks expected to hold, led by the Fed, a pleasant contrast to the period before markets dived in February last year. With the countdown to the March 1 deadline the case for US-China talks, this could perhaps be the greatest driver for market sentiment as we move forth.
US-China trade talks to continue
On the latest round of trade talks, the status quo conclusion, while leaning towards the positive, had not been far from expectations and could provide little inspiration for markets. President Donald Trump had noted “tremendous progress” and the likelihood for talks with Chinese President Xi Jinping in the near term while his team had also confirmed plans to return to China for the next round of talks. On the other hand, China had also pledged more soybean purchases, a new development, against the backdrop of acceleration for foreign investment law. That being said, the contentious issues on intellectual properties remain hanging on the line and perhaps serves as the deal breaker for the talks and thereby markets down the line. No surprise finding little reactions through from US futures nor early movers in the Asia region.
The end of the week for Asia markets would likely be characterized by the digestion of various updates ranging the latest US-China trade talk conclusion and the slew of data expected to be out within the day. This includes China’s Caixin manufacturing PMI in the early hours, one to be tracked for any surprises mirroring Thursday’s NBS release. Earnings out from Amazon this morning had served little to shore up confidence with the mixed guidance.
Watch for the Chinese figures ahead of US labour market updates and the ISM manufacturing reading for January into the end of the week.
Yesterday: S&P 500 +0.86%; DJIA -0.06%; DAX -0.08%; FTSE +0.39%
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