This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Look nevertheless to regional leads including China’s data releases, which could provide some drivers for equity prices today.
US equities, currency in gains
Wall Street has continued in the atmosphere of relief as the CBOE volatility index, VIX, reflected a market that has further reposed itself. A second day of triple highs on the Dow, S&P 500 and NASDAQ was seen on Wednesday, though we are getting a more diverse mix of gainers and losers between sectors slowing down the pace of gains.
Leading gains on Wednesday had notably been energy stocks with the sector up 1.24% on the S&P 500 index. Oil market bulls had given crude prices a boost as confidence was stroked by better demand forecasts from both the International Energy Agency (IEA) and OPEC. While the IEA had forecasted rising world demand for 2017 in their August release, the latest update had been the highest expectation since 2015, prompting the optimism.
Having said that, the notable change overnight had been the apparent strengthening of the US dollar. After having skied downslope in the past few months, the dollar index had continued its reversal from sub-92.00 levels, last seen just below 92.50 this morning. Boiling up the anticipation had been further tax reform talks, this time by US House Speaker Paul Ryan. The promise of a tax plan in the week of September 25 had certainly gotten the market excited and also produced a moderate lift for the heated financial sector.
Despite the strong set of leads, Asian markets may find a mixed start to the morning. The softening of the US dollar, which had contributed to the boon in Asian equities, had shown some signs of reversal. This had in turn created pressure for Asian equities since the start of the week. Comments by US treasury secretary suggesting a cut-off of trade between US and China over North Korea further weighs. The consolation may however be for the oil and gas sector that could take after the trend seen in US markets with the significant lift in crude prices. Early movers in the region have so far been seen with mixed returns.
What I will be watching today for Asian equity markets will be China’s retail sales, industrial production and fixed asset investments numbers. This comes ahead of other items including Hong Kong’s own industrial production and PPI numbers for Q2. The strong set of August data from China, including the PMI and inflation numbers, certainly sets high expectations for the release and an outperformance here could help to lift the rather lacklustre regional markets. For the local Straits Times Index (STI) which had come under pressure of late, we could be seeing a pickup in activity with the overnight leads and the series of items ahead.
Additionally, Australia’s employment data will be due in the morning and the key focus for markets in the Europe and US hours would be the Bank of England meeting and US CPI numbers.
Yesterday: S&P 500 +0.08%; DJIA +0.18%; DAX +0.23%; FTSE -0.28%