Asia Morning Update

The turn of the week is unlikely to give us more reprieve from the focus on US policies and the let-down last week appears certainly provides the market more reasons to re-evaluate the Trump-inspired rally. For Asian markets, a turbulent start to the week could be the case.

Source: Bloomberg

Friday saw Wall Street trading broadly lower, with both the S&P 500 index and the Dow Jones touching an over 1-month low in the session. The new administration’s hasty withdrawal of the failed healthcare reform Bill vote certainly contrasted their initial confidence. Beyond the impact on healthcare, the vote had been seen as a test to the self-proclaimed deal-maker and the new administration's abilities to also deliver other promises including tax and infrastructure policies. A breakdown of the S&P 500 index by sectors found the ones associated with the Trump-rally in red on Friday, reflecting the market sentiment.

The failure to acquire enough support to replace Obamacare had not stopped President Donald Trump from striking an interesting note, highlighting that 'Obamacare will explode' and urged the public to 'not worry'. While the idea of the health insurance system exploding should deserve some degree of concern, the forward-looking market may be quick to move past this. This is especially so with President Donald Trump tuning the channel to tax policies.

The fact that the new administration may have less money to play around with after the healthcare reform vote failed to pass through, may however be a lingering concern. This could provide challenges ahead for the tax reform, a point that House speaker Paul Ryan had conceded.

Asian markets would not only have the abovementioned to work with at the start of the week. Sunday also saw a joint committee of ministers from OPEC and non-OPEC oil producers issuing a recommendation for the extension of the global deal to stem output. Oil, one of the most important commodity in the world, saw a modest jump in prices with American producers still chugging away.

WTI futures had edged up to trade above $48.00 per barrel (bbl) at the start of the week. A recommendation by the OPEC Secretariat with regards to the extension of the agreement will be made in April and could perhaps be the most watched item ahead of the next ordinary meeting on 25th May where the decision would be made.

Early movers in the region were last seen weighed by the developments in the US, the Nikkei 225 dropping a full 1.0% when last checked (8.30am Singapore time). Waning confidence in the US had also dampened USD strength, sending USD/JPY down below $110.50 this morning. Hong Kong and the local Singapore markets are expected to follow the KOSPI 200 into red based on our opening calls. Monday will see Hong Kong’s February trade balance released. However it may not be until the end of the week, where we can get some positive regional leads via China’s March PMI figures.

Friday: S&P 500 -0.08%; DJIA -0.29%; DAX +0.20%; FTSE -0.05%

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