Asia morning update - resistance ahead

Eager for US-China trade talk progress

The two fresh news that had arrived on the trade front had been reports detailing the difficulties on intellectual property issues during the early January US-China talks, followed by what had been touted as an unusual party address by Chinese President Xi Jinping on ‘serious dangers’.

While retrospective, the IP issues report certainly works against the slew of tariffs easing talks that had encouraged markets of late. Alongside China’s slowest growth performance seen since 2009 reported yesterday, these had been touted as reasons undermining the performance of US futures and European bourses on Monday. This back and forth on US-China trade relations certainly should not come as a surprise as uncertainty swirls ahead of the next round of US-China talks, one of paramount importance not just for regional but the global economy as its implications run wide. We have notably also had the International Monetary Fund (IMF) slashing their global growth forecast for 2019 and 2020 to 3.5% and 3.6% respectively, both from 3.7% in October last year. Coming ahead of the heating up of talks in the World Economic Forum at Davos, this may well induce further topics and rhetoric urging conciliation between the two sides, thus potentially giving us more to watch amid a light Tuesday.

All the above said, reports had also outlined a meeting between top leaders in China convened by President Xi Jinping, urging efforts to ensure political stability as ‘major risks’ mounts. While reflecting the concerns from authorities, such an occurrence could perhaps be seen as a reflection of the eagerness to see success in upcoming US-China trade talks as well, as we look to the Washington meeting next week.

Tuesday markets

Against the backdrop of refreshed woes over growth and US markets having been away for the Martin Luther King Jr. day, there leaves little to inspire Asia markets. Likewise for crude prices trading little changed from Monday. Early movers in the region were seen in mild red this morning across the likes of the ASX 200 and the Nikkei 225.

The caution would be for pressure across the likes of the Hang Seng Index and the Straits Times Index as prices broach resistance levels. The rally within consolidation since the start of January had largely presented the anticipation from the markets to see a deal being established between US and China. With the lack of concrete details, it would be a challenge for the two indices to breakout on the upside, thus do watch for rejection with this lack of fresh impetus.

Yesterday: S&P 500 +1.32% (Friday); DJIA +1.38% (Friday); DAX -0.62%; FTSE +0.03%