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Asia morning update - awaiting fresh leads

The lacklustre trade into the end of the week for Asia markets awaiting fresh fundamental drivers to swing it out of the current consolidation. This may well unfold in the coming week with the US-China trade talk highlight.

Trade murmurs

A recap of the overnight market action finds the early tech boost for Wall Street, underscored by semiconductors, were quickly derailed with antagonizing comments with regards to US-China trade negotiations. US commerce secretary Wilbur Ross took to the wires and reflected that both countries are ‘miles and miles from getting a resolution’ days ahead of the talks in Washington. Consequently, the US 500 slipped at one point to a decline of more than 0.4% before eventually ending the session up 0.14%. Meanwhile, the Dow industrial index managed only a near-neutral close at best. Some have noted that President Donald Trump had again expressed his hopes for a trade deal with China, certainly nothing new here. The takeaway here, remains the fact that we would likely continue to find headlines surrounding the issue prior and through the meeting to keep one guessing on the outcome. The latest episode, seemingly taken with a pinch of salt as posturing, appears to have kept the damage to a minimal. Market levels also maintained the flat trading pattern as bulls and bears wait out for the conclusion of the talk next week.

Separately, the two bills passing through the Senate yielded no success as expected with the government shutdown status quo. Amid the worries of economic impact and the potential absence of the GDP reading next week, the greenback had notably gained grounds. This was owing to the European Central Bank (ECB) dovishness on Thursday, over and above the slide in bond yields in response to the heightened risk sentiment from commerce secretary Ross.

ECB dovishness

Falling in line with the Federal Reserve, the ECB had likewise taken the route of the Bank of Japan, holding steady with monetary policy and alluding to the gathering of risks within the market. Departing from earlier outlook of ‘broadly balanced’ risk, ECB president Mario Draghi highlighted the tilting of risks to the downside, not a surprise with the weaker showing of economic data out of Germany earlier among others. The main draw here had been the lack of opposition towards the market’s view that the ECB will unlikely hike rates this year, one that brought about the slump for the euro. Initial reactions saw the EUR/USD pair down past $1.13, threatening to trade lower in consolidation, though we have already seen bids coming in at the level. It all boils down to growth for the common currency on where it would go next as the ECB likewise stay in assessment.

Holding pattern for Asia

The consolidation extends to Friday with markets in the region shrugging off the posturing comments out of the US and retracing some of the losses from previous sessions. Early movers in the region including the likes of the Australia 200 and Japan 225 have led the way with 0.4% and 0.7% gains respectively. Across Asia markets, we are seeing the Hong Kong HS50 and Singapore Index due to inch towards resistance once again seen at around 27267 and 3278 respectively. The break, however, would await the leads in the coming week as we delve into the key items in our week ahead due later in the day. For the day ahead, Singapore’s December industrial production will be one to watch.

Yesterday: S&P 500 +0.14%; DJIA -0.09%; DAX +0.53%; FTSE -0.35%

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