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Asia markets awaiting fresh leads

The state of idle for Asia markets looks to continue at the start of the session, though the trickling in of data to watch this week will ramp up from Tuesday.

‘Not ready’ for a US-China trade deal

The leads on hand are perhaps little changed from Monday. While European markets celebrated the less than expected claim by eurosceptics and nationalists, reactions had largely been concentrated to the area.

Meanwhile President Donald Trump’s post trade talk press conference in Japan saw to comments that ought to aggravate markets, despite the lack of concerns had been apparent. Over and above stating that the US is ‘not ready’ to make a trade deal with China, he had also noted that American tariffs on Chinese goods ‘could go up very, very substantially, very easily’, seemingly placing a threat there. While US and UK markets had been closed at the start of the week, the sentiment barometer USD/JPY had suggested that risk sentiment were little changed following the comment. China’s foreign ministry had perhaps best characterized the current market sentiment by reflecting that the US ‘has had various voices on China-US trade talks’, thus describing the flipflopping rhetoric that the market appears to be growing a little de-sensitized towards.

Asia open

Against the backdrop of a lack of reaction towards President Donald Trump’s words and the vacuum of leads, Asia markets look to trade to its own tune from a mixed but muted start to Tuesday.

The US and UK markets will be returning on Tuesday and the week certainly looks to get busier from here. While the data docket still looks rather empty during Asia hours, consumer confidence updates in the EU and US should be watched today. As suggested in our Asia week ahead, the US conference board consumer confidence index and China’s manufacturing PMI will be two early May indicators to watch for the impact of the trade escalation this week. The US consumer confidence index, due Tuesday, could have the potential to disappoint, one to watch for market reactions.

Trade tensions and the yuan

On FX, due attention had been on the Chinese yuan amid the brewing trade tensions. A reiteration of the stance to guard the yuan from further weakening had been made clear once again over the weekend and that had correspondingly seen to the Chinese yuan gaining some strength at the start of the week.

Looking at the offshore yuan against the US dollar, USD/CNH, which had perhaps been a better reflection of the confidence towards the Chinese economy, have seen prices pared back moderately from the overtly weak state. USD/CNH is now seen hanging just above $6.90 once again, finding support above the level. An attempt to curb further yuan weakness by the authorities could leave the US little room to layer additional penalties upon Chinese imports, as seen from the threat last week. That said, with May data expected to stream in from China starting Friday, further weakness shown in economic performance may likewise provide little breathing room for the Chinese currency.

Source: IG Charts

Yesterday: S&P 500 +0.14%; DJIA +0.37%; DAX +0.50%; FTSE +0.65%


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