Risk-on trade for Asia markets from tariffs delay

The latest delay for the next round of tariffs implementation on Chinese goods by the US avoids a clash on China’s 70th anniversary, one to join the hopes for bank support to aid with the recovery in market sentiment.

China tariff increase moved to October 15 from October 1

Perhaps one of the lingering fears despite the announcement of the early October meeting had been the aggravation of the next round of increase in tariffs from 25% to 30% for 250 billion dollars’ worth of Chinese imports and what it would do to the US-China relations and markets. This had notably been eliminated in the near-term with the latest update from President Donald Trump on the two-week delay. USD/JPY was seen ticking up on the announcement, breaking the $108 level when last checked with this risk-on mood renewed.

With this slight improvement in conditions for the US-China trade issue, coupled with the anticipation of the suite of stimulus from the series of central banks, Asia markets are expected to be fired up into the Thursday trading day. This also follows China’s Ministry of Finance announcement with the list of exempted products from the additional tariffs on Wednesday. While Global Times’ editor Hu Xijin had noted that the tariffs exemption does not represent concession from China, it nevertheless reflects the growing impact of the tariffs upon the wider Chinese economy. As the series of data including trade and the latest PPI numbers had shown, China’s economic conditions had continued to trend downwards to reflect the deterioration. This could prove to be key to seeing further alleviation of the situation even if we do not get a trade deal in the medium term. Look to the gains across Asia markets into the Thursday session.

EUR trading softer ahead of the ECB

On FX, notably with the latest US PPI strength and the surge in risk-on mood from both the tariffs delay and central bank anticipation, we have seen USD/JPY trading above $108 as told above. Specifically, on EUR/USD, one would note that prices had declined once again ahead of the European Central Bank (ECB) meeting to oscillate around $1.1010 levels after touching the week-to-date low. The expectation for the suite of stimulus expected in the upcoming ECB meeting as we know had been built up in the past weeks with poor economic readings out of the likes of Germany and fuelled further by conversations from ECB members. As such the risk here would be the likes of ECB delivering short of the market’s anticipation that could see to the aggressive unwinding of positions for a market having priced in these stimulus views. For EUR/USD this could would mean upsides are expected to be seen with the next resistance level at around $1.1052, coinciding also with the downtrend resistance. US CPI release will also be in the mix in the Thursday session that would play a role in guiding Fed cut expectations.

Source: IG Charts

Yesterday: S&P 500 +0.72%; DJIA +0.85%; DAX +0.74%; FTSE +0.96%

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 40
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.