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Asia market morning update - talks in progress

Ahead of the US-China trade talk conclusion, little signs of progress had been noted, though bargain hunting appears to in part aid with a reversal for Asia markets this morning.

Worst week since October

Wall Street, as with Asia markets, are set to clock the worst week since October 2018 amid the eruption of trade jitters this week. The overnight market action was made no better by reports of Chinese vice-premier’s diminished role in this round of trade talks and President Donald Trump noting tariffs as an ‘excellent’ alternative to a trade deal with China, adding fuel to fire. The likes of the S&P 500 index saw to broad-based decline with only the, real estate sector managing to eke out some gains. With this evasion to safety, this had seen to the S&P 500 index testing the 50-day moving average, though prices did end back above the level. Look to whether this will hold as we await the second day of talks. As it is, little had been made known about day one besides President Trump being briefed about the progress. Perhaps twitter will be one to scrutinize as we go through the day.

Asia open

Asia markets are expected to commence mixed amid the lack of clarity over the progress of trade talks at present. Certainly, there had been the update of President Donald Trump receiving a ‘beautiful letter’ from Chinese President Xi Jinping and a call to ensue, but amid the back-and-forth in headlines, this may mean little for the eventual trade conclusion.

Look to how the afternoon session may unfold, and it may be of little surprise to find investors staying on the cautious end of things. The key data for this Friday would be US’ April CPI, though it is likely that any developments on the trade end may take precedence in moving markets.

Singapore Q1 bank earnings round-off

Separately, this morning had also seen OCBC’s Q1 2019 earnings rounding off the banking season for the local banks. Likewise surprising on the upside in net profit, OCBC’s $1.23 billion first quarter performance had surpassed the lukewarm expectations prior to the start of the earnings release. In terms of contributors, it had been positive readings on both the interest and non-interest income end. For the net interest income, both a strong net interest margin rise, at a high single-digit of 9 percent and also loan growth comparable to DBS at 5 percent had been ones driving up revenue. Likewise with non-interest income, this is perhaps no surprise with the improved financial conditions as noted by OCBC. Notably in terms of non-performing loans, the bank had made special mentions of allowances provided for the oil and gas support vessels and services which they have noted to be about 5 percent of their total customer loans at the end of Q1. Though it is not of a huge proportion, it does appear that the bank is taking a cautious stance here as well, what more with oil prices showing a reversal towards a downtrend of late.

Looking at prices, the likes of DBS remains a favourite in light of the relatively high dividend yield and favourable valuation, more so with the recent dip in prices. That said, for short-term entry the current macro backdrop of US-China tariffs uncertainty however does a disfavour for prices. Momentum can be seen turning on the MACD as the 50-day moving average support comes under threat.

Yesterday: S&P 500 -0.30%; DJIA -0.54%; DAX -1.69%; FTSE -0.87%

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