Asia market morning update - a prospective US-China trade deal

As it is, the trade deal between US and China remains a prospective one, lending doubts to Wall Street that took profit at the start of the week, one to return us to the risk-off mood in Asia.

Source: Bloomberg

Wall Street put a halt to the early cheer, with contemplation setting in as to whether the current rally had run ahead of itself on largely prospective outcomes. What appears to have almost become a routine start to the week, where we find a touch of positive trade rhetoric, saw little buy-in from the US markets this round. This may be of little surprise in light of the fatigue that the market is undergoing with prospective news on trade thus far. Technical reasoning had also been a strong driver for the eventual lower close as seen on the likes of the S&P 500 index. An early shoot for prices to 2816.88 failed the 2800 level once again into the close as prices evaded overbought territory on the RSI. As it is, concrete details or plans may be what is needed for a market that had largely priced in all the enthusiasm.

On FX, notably, one would have seen the US dollar little afflicted by President Donald Trump’s jawboning on Monday, perhaps an affirmative to the strength to be held. The US dollar index was seen clocking a high of 96.816 before receding slightly into Tuesday morning here in Asia. As evident from the chart below, the upward trajectory held perfectly as it is, waiting for the break of the horizontal resistance at around 97.20. Over and above the point told yesterday from ex-New York Fed president William Dudley, that further rate rise looks plausible going into the second half with the data-driven Fed, the growth differential would likely remain one to keep the king dollar going. One to watch with the slew of data out in the week and the risk aversion attitude likely to be held.

US Dollar Basket (SD1)

Notably, this morning saw the trickling in of information on China’s growth target, which had now been set at an expectedly lower range of between 6.0% to 6.5%. This comes alongside a 3 percent point cut to the top tier of value-added tax, perhaps the bigger piece of news for markets here and one that could help to shore up some optimism for the manufacturing sector.

Amid the risk-off atmosphere tailing Wall Street, look to softer Asia markets that would be tapped back into consolidation after yesterday’s attempt at gains. The focus set on the likes of February’s Caixin services PMI from China ahead of the slew of releases including US’ February ISM services reading as well. The Reserve Bank of Australia also decides rates today, one to watch for dovish intonations.

Yesterday: S&P 500 -0.38%; DJIA -0.79%; DAX -0.08%; FTSE -0.39%


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