Asia morning update - trade exchanges

Positioning ahead of Jan 30-31 talks

As told in our week ahead note on Friday, the scrutiny remains on US-China trade even as no scheduled announcements or meetings are expected. After seeing Wall Street enthused by reports of US considering lifting tariffs on Friday, the weekend delivered another dose of positivity for markets. This came in the form of reports suggesting that China had offered a path to eliminate trade imbalances with the US in their early January talk in China. Even though scepticism from the US had also been shared coupled with President Donald Trump’s refute of the reports suggesting the lift of tariffs, it appeared that the only takeaway for markets remained the increased willingness to work together for a deal from both sides. This series of updates, truly the jockeying and positioning prior to the Jan 30-31, had not been unexpected and may well be the case in the lead up period to guide expectations.

Coming back to prices, though, one would note the sprouting of prices above key resistances across both the Dow and the US 500. Prices sit at an over 1-month high on both indices, with the lookout to the 61.8% Fibonacci resistance level. Some signs of faltering can be seen in US futures this morning, though not a surprise as we approach overbought territory. Moreover, with US markets away this Monday, I would not be reading too much into this, at least not until the Chinese data dump has passed to better assess if this momentum can continue.

China growth watch

The leads lined up for Asia markets, particularly from the above-mentioned optimism over US-China trade talk progress, have certainly been upbeat this morning. Early movers in Asia including the Australia 200 and the Japan 225 both risen at the open, up 0.4% and 1.0% respectively when last checked.

I would, however, be cautiously trading the short-term uptrend for the likes of the Hang Seng and Straits Times indices both from a technical perspective as prices approach resistance and on account of the Chinese data due this morning. The data barrage includes China’s Q4 GDP expected at 6.4% year-on-year, one that may not be hard to meet with frontloading and the weaker yuan cushioning the impact from tariffs implementations. That said, the high frequency figures such as retail sales and the industrial output would be the ones to trade to the tune of, as we watch the results against the consensus.

As it is, we have seen some slight demand for haven assets including the USD/JPY (大口） pair that had edged lower, likely a result of the risk aversion ahead China’s data dump. One to watch.

Friday: S&P 500 +1.32%; DJIA +1.38%; DAX +2.63%; FTSE +1.95%