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Asia market update - politics in focus

As European elections results trickle in and US-Japan trade talk commences, politics look to have its grip on markets in a light start to the week.

Trade watch

As shared in our Asia week ahead, US-China trade remains centrepiece for markets this week and the lack of fresh impetus can be seen leading to a mixed open for Asia markets. US and the UK will be away that could see to lighter volume on Monday but with President Donald Trump touring Japan and talking trade during Asia hours, one would nevertheless be attentive towards any fresh updates.

Recapping on last week’s action, Wall Street concluded the previous week lower despite the slight gains noted on Friday. For fear of sounding like a broken record, the US-China trade tussle continues to shroud markets into a state of uncertainty leading to the relative indecisiveness that can be seen across major indices. This week will be one tracking politics, as mentioned above, and some of the early May indicators that are few and far between. Month’s end moves may also be one to affect the US dollar with more details below.

Levels check

USD index: The uptrend that remains for the US dollar index, measured against six major currencies, is perhaps unquestionable here. This week however finds mixed leads in store. On one hand, the potential for the May University of Michigan sentiment to disappoint and the double top pattern creates potential for downsides. On the other hand, month-end flows could see bids coming in for the greenback that may well hold prices at current level by the end of the week, one to watch.

Source: IG Charts

S&P 500: The S&P 500 index had been held in consolidation between 2800 and 2891 levels since early May as the idiosyncratic updates on US-China trade came through to whipsaw markets. The lack of clarity on the impact from this trade update may well keep the index sustaining in the current channel. While one suspects that the impact could be reflected in the data into May, we would not be getting most of these updates until next week that could keep prices in consolidation. Watch for any US-China trade updates in the week.

Source: IG Charts

STI: Asia markets had evidently taken in the latest trade escalation with greater concerns though broadly more supportive central banks likewise backs markets with greater support. The likes of the local STI can be seen falling towards the strong support at 3150 level which will be crucial in keeping prices from exploring further downsides. Slight dips should not be ruled out seeing the current stalemate between US and China and ahead of the G20 meeting. This is more so if China’s PMIs disappoint into Friday from the 49.9 consensus, one to watch.

Source: IG Charts

Brent crude: Crude oil prices have had a poor two-weeks finding surprise build-ups in US inventory one to knock it off the uptrend. Prices can now be seen threatening its 200-day moving average, perhaps showing greater risk of tilting lower from here. Short-term fluctuations should not be ruled out though longer term downtrend may not be a risk at present given the expectations for OPEC support to sustain for the rest of 2019.

Source: IG Charts

Yesterday: S&P 500 +0.13%; DJIA +0.37%; DAX +0.49%; FTSE +0.65%

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