Muted end for Asia markets
Post the series of central bank meetings, Asia markets look to end the week with a mixed but muted tone, watching any further changes in risk sentiment in the session.
Focusing on yields
Wall Street can be seen continuing to charge ahead in the Thursday session amid the collective dovish stance seen held by central banks across the regions. ‘Risks’ and ‘uncertainties’ are the new buzzwords in town, if not already, as the likes of the Fed to the Bank of Japan signalled their accommodative stances to address these. In turn, this had seen to the comprehensive S&P 500 index leap further to a record close on Thursday with all sectors gaining on the session.
More importantly for markets, it is the fact that we have US treasury yields reflecting a continued decline, particularly on the 10-year tenor. US 10-year treasury yields fell through the 2.0% level for the first time since 2016 and can be seen hanging just above the level when last checked. The subsequent trigger for the market had been an apparent drag on the greenback seeing the US dollar index’s uptrend on verge of cracking at present, one to watch. For USD/JPY, this kicks into place our view on further downsides. Prices may find some support around the current $107.35 levels, but the downtrend looks to have been again renewed which could see a steeper pullback with the current support broken.
Meanwhile the disparate directions between the bond and equity market had been another apparent trend with both the safe and risky assets finding demand post the Fed meeting. Given the relation of the treasury market with the pricing of borrowing costs, this new lowered normal for yields as with the expectations on the Fed’s next move altogether serves as a boost for the broader market.
Source: IG Charts
Crude oil prices supported
In particular, one would have noted that energy stocks rose to be the top gainer on the S&P 500 index with the surge in crude oil prices. WTI and Brent were last seen trading around $57.40 and $64.80 per barrel when last checked. The upsides had been fuelled by a combination of the concerns of further escalation of tensions in the Persian Gulf and the hopes for the upcoming OPEC meeting. Notably, however, President Donald Trump had attempted to downplay the attack and one suspects this is with interest to see lower crude prices. That said, limited reaction had been seen with the market choosing to err on the cautious end that could keep further downsides intact in the near-term.
Source: IG Charts
Asia markets look to open the day relatively mixed, having exhausted the leads on hand and having a relatively quiet day spread ahead. As told above, look nevertheless to energy stocks gaining even as the broader market may see the lack of any breath of life going into the session. Japan’s CPI can be seen matching the market consensus with core CPI out at 0.8% year-on-year. Look to the Markit PMIs out of the eurozone and US and the string of Fed speakers into the session.
Yesterday: S&P 500 +0.95%; DJIA +0.94%; DAX +0.38%; FTSE +0.28%
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