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US-China trade tension reigns for markets

Trade tension continues to remain chieftain in guiding market movements into Thursday for Asia, though keeping an eye on the political development in one of Asia’s key market, Hong Kong.

Sentiment-driven market

Wall Street continued to decline into Wednesday seeing concerns over on-going trade tensions surrounding the US, outshining the expected support from the Federal Reserve. Specially, the evasion to safety had been apparent as seen from the S&P 500 index whereby the cyclical sectors had been the ones dragging on the broad index. The surge of constituents on the S&P 500 index rising above their 20-day moving average had also notably taken a little breather. This was also despite a below-expectation May CPI reading that further fuelled expectations for the Fed to cut rates.

Ahead of the G20 leaders meeting next week with the Trump-Xi meeting still uncertain and the Trump administration downplaying the likelihood of any imminent deal despite President Donald Trump’s threats, the risks on hand remain.

Notably, leading the decline on Wednesday on the S&P 500 index had been the energy sector as a build-up in US crude inventories sent crude prices spiralling to a 5-month low. Wednesday’s US EIA report had shown an increase of 2.21 million barrels against a sub-0.5 million-barrel expectation. In turn, WTI and Brent crude futures were last seen around $51 and $60 respectively and appears to be on the way to continue the downtrend, one to watch. The OPEC monthly oil market report will be due today ahead of the IEA’s on Friday but the risks will also be with any deterioration of the demand outlook thus giving prices a bearish bias.

Asia open

A soft open had thus far been seen for Asia markets amid the abovementioned backdrop, doused with a strong dose of trade tensions implications. The attention today may largely remain with Hong Kong, one of the key markets for the region. A steeper than average drop had been seen for the HSI as the index gave up its 200-day moving average once again on Wednesday. As protestors and polices stand ready in Hong Kong, bracing for a second day of potential clashes, look to sentiment affecting the local market. The next strong support comes in at the 27,000 figure.

Yesterday: S&P 500 -0.20%; DJIA -0.17%; DAX -0.33%; FTSE -0.42%


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