US-China trade focus

Kickstarting a week focused on economic conditions and geopolitical risks, we are seeing risk sentiment relatively balanced at the start of the week.

The focus for Asia markets will largely be attuned to the US-China trade talks among others.

Looking towards a mini deal

Asia markets can be seen broaching the week with moderate positivity following optimistic views over the weekend on US-China trade talks. This is with President Donald Trump suggesting a ‘very good chance’ of a deal alongside news of China seeing narrower scope for a deal thereby boosting the chances of a constructive outcome. As far as the early movers have suggested, both the Australia ASX 200 and the Nikkei 225 had opened the session in green, though the latter appears to be seeing some fluctuations thereafter.

The positioning within the FX space, however, broadly suggest that investors remain largely cautious. USD/JPY seen little changed around $106.80 into Monday morning despite the abovementioned weekend developments. This is perhaps no surprise given the lingering concerns of both US-China trade, whereupon breakdown could lead to further tariffs escalation, and the Brexit impasse that sustains.

The good news from last Friday had perhaps been the better than feared US labour market data suggesting that the headline payrolls addition had turned up close to consensus at around 136k while unemployment had declined further to 3.5%. Drilling deeper into the numbers, however, one would see that the likes of the average hourly earnings had underperformed which ought to be the crux here. Hiring within the services sector had also been one to decline, one to note in relation to the concerns over contagion of the manufacturing slowdown towards the former. With this backdrop in mind, the risk-off directive for the markets may well sustain. USD/JPY can be seen trading just above support at around $106.74 levels, watching a likelihood of further downsides here with the momentum in the same direction.

Data-centric week

While a relatively quiet start is expected to the week, with the likes of China and Hong Kong away, it remains one to watch the economic performance across Asia to the US for trade. US consumer and producer prices will be in focus alongside industrial production and trade performance. The preliminary October UoM sentiment is in view as well for the consumer sector while the FOMC minutes will be out midweek.

For the local market, it will be one awaiting the Monetary Authority of Singapore (MAS) meeting whereby monetary policy easing had broadly been expected, keeping the bias for USD/SGD downsides. Singapore’s Q3 GDP will also be due on Friday.

Friday: S&P 500 +1.42%; DJIA +1.42%; DAX +0.73%; FTSE +1.10%

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