Asia morning update - tariffs deadline extension cheer

Risk-on is back with the latest announcement of the March 1 tariffs deadline extension, although the reaction is expected to be measured awaiting further detailed updates.

Source: Bloomberg

The trigger for gains at the start of a busy week is of little doubt the latest update on the tariffs deadline extension and an expected summit between President Donald Trump and President Xi Jinping, where a trade deal would likely be signed. Taking to twitter, President Donald Trump had made the latest announcement, although one would reckon the tariffs extension had largely been in the price with the building up of anticipation. The fresh news on the expected summit with President Xi Jinping, however, invites a new wave of questions. President Donald Trump noted that ‘important structural issues including intellectual property protection, technology transfer, agriculture, services, currency’ had been amongst the items moving along in the trade talks. These are some of the more difficult issues on hand, leading one to question which side had been giving in with assumptions leaning towards the US being on the losing end. That said, this positive development in talks so far remains one to boost markets, as evident in US futures this morning.

Notably, reactions had mostly cut across to the FX market this morning as both the offshore Yuan and the related Aussie dollar had been ones to strengthen amid the rosy rhetoric on trade. USD/CNH finds the bearish momentum building, touching a 7-month low this morning with the anticipation of pressure for the currency pair amid China’s expected support for the Yuan. Prices can however be seen entering oversold territory, one to watch.

Asia markets are due to cheer the latest progress on US-China trade though this will not be a raucous one, lacking further details on the prospective trade deal. Short for Singapore’s inflation reading, the day will likely be one waiting for further details on trade. Look to the slew of items as told in our week ahead, where there will really be something for everyone ranging monetary policy in the form of Fed Powell’s testimony, geopolitics of Brexit, the second Trump-Kim summit and packed calendar into the end of the week.

Levels check

S&P 500: The upward momentum from January can be seen fading slightly last week as the indecision in markets came by without the likes of breakthroughs in trade development. Prices remain pressured ahead of the 2800 level, one to watch this week with the slew of events.

US 500 Cash ($10)

Specifically, on tech stocks, the S&P 500 index technology sector ETF (XLK ETF) have yet to find fatigue as compared to the broad index. The test of the next resistance at around $70.95 looks imminent. Watch the Fed and data into the end of the week, though pressure from the growth data end could be a drag.

Technology Select Sector SPDR Fund

HSI: As with US markets, the likes of the Hong Kong HSI and the local STI can be seen waffling awaiting breakthroughs in US-China trade that remains the overhang for markets. The tariffs extension deadline is expected to help push prices, but further details remain the limitation.

Hong Kong HS50 Cash (HK5)

USD/JPY: Risk on atmosphere provided a slight push for USD/JPY this morning, but the ascending triangle resistance at around $110.90 can be seen holding strongly. Watch for a clear break here for the upward momentum to resume. Event risks in abundance this week.

USD/JPY Mini

Friday: S&P 500 +0.64%; DJIA +0.70%; DAX +0.30%; FTSE +0.16%


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