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Asia market morning update - US-China trade deal progress

Risk-on atmosphere returns with headlines covering progress on US-China trade, one for Asia markets to cheer alongside the resilient US markets from Friday.

The developments over the weekend had not been two steps removed from US-China trade with the latest reports on the two countries closing in on a deal, one to boost markets at the fore of the week. What is interesting in the latest update is the prospective date, of around March 27, for the Trump-Xi meeting to formalize the deal that would heighten expectations going into the Monday session today. As far as early movers have suggested, both the Australia ASX 200 and the Nikkei 225 had tuned up 0.6% and 0.9% respectively, just as US futures charged ahead. This is also a continuation of the gains that had been seen in US markets on Friday, clocked despite the weaker-than-expected ISM manufacturing report. Look out to the slew of items, particularly the jobs data for the week as highlighted in our week ahead.

Notably, one would have likewise seen President Donald Trump’s latest dissent towards the strength of the greenback over the weekend. This had weighed slightly on the USD into Monday’s morning in Asia and thereby one to support regional markets into the day. The extent to which the President’s words could curb further strength, however, remains a question. As heard from ex-New York Fed president William Dudley over the weekend, further rate rises look plausible going into the second half with the data-driven Fed, one to watch March’s FOMC for longer-term interest rate outlook.

The President’s jibe at Federal Reserve chair Jerome Powell over interest rates, balance sheet management and the US dollar, notably also comes ahead of the Fed chair’s address on Friday, perhaps one to watch for any address of which. The bias for the week, however, remains on the upside for the USD in light of the strong set of labour market data expected.

Levels check

S&P 500: Resilience can be seen with last Friday’s gains for Wall Street despite the soft economic data releases. Momentum, however, remains wavering amid the lack of fresh updates on the likes of US-China trade.

All said, the abovementioned weekend news on US-China trade progress would be one to boost markets into the start of the week. Look to a decisive swing above the 2800 level into the week for confirmation of a continuation in the uptrend.

STI: The local STI would be one cheering the latest US-China trade news, though seeing the resistance at around 3278 curbing the upsides. Look to whether the positive sentiment can push prices to retest the resistance. Data such as February’s PMI today and China’s February trade on Friday may remain ones to keep the rangebound trade in play.

EUR/USD: EUR/USD will be one to look at this week amid the data releases. The European Central Bank (ECB) meets this week with no changes expected. The key is however to look for any signs of increased dovishness from ECB president Mario Draghi and the forecasts. Data-wise, risks are also towards the downside. Look to pressure back towards the $1.13 level in the week.

Crude oil: The consolidation for Brent crude oil prices continue, despite last Friday’s drop. Supply pressures meets the news on US-China trade, one to see the flatlining continue. Eye either a break of the $68 resistance or drop past support at around $63.50 out of the current zone.

Friday: S&P 500 +0.69%; DJIA +0.43%; DAX +0.75%; FTSE +0.45%

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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