Asia market morning update - trade volatility

Wall Street bulls in control

If asked how seriously Wall Street had perceived President Donald Trump’s latest trade threats as more than just positioning, Monday’s market action had reflected that it had probably not been very much. This was as the likes of the comprehensive S&P 500 index rose back from the drop similar to Dany’s Viserion after being shot down by the night king in Game of Thrones, though with trade-sensitive stocks chalking up the losses. A relatively smaller dip was seen on the likes of the Dow and the S&P 500 index at -0.25% and -0.45% respectively, compared to the MSCI Asia Pacific ex-Japan’s -2.00% or the Shanghai Composite’s 5.58% sliding past the 3,000 level.

To a large extent, the recent decline in market breadth had likely invited the anticipation for a short-term pullback, which also lured the bulls in amid the broader market uptrend. Certainly, the fact that talks are still expected to continue, albeit at a later commencement of Thursday, provides some relief from the weekend episode. Moreover, President Donald Trump’s aide treasury secretary Steven Mnuchin’s commented that the US would reconsider duties should talks resume progress reflects the negotiation tactic in play. While it may be hard to make out a clear picture as to where talks are headed amid the noise, Monday’s US market action does suggest that the broad market is still viewing the current market situation of stalled rate rises and positive earnings situation as affirmative for equities.

Still, we have seen volatility picking up in the overnight session whereby the CBOE volatility index, VIX, briefly shot past 18.0 before ending the session lower. This is perhaps a refreshing change for traders looking for some swings, and further repeats should not be ruled out this week amid the uncertainty that still looms ahead over the outcome of this week’s talks, one that previously had investors yearning for a trade deal from.

Asia open

Amid the reversal on Wall Street and news that US-China talks are still set to continue this week, look to a more uplifting mood in Asia markets. Early movers in the region have so far seen gains on the likes of the ASX 200 at 0.49% though the Nikkei 225 returning after the Golden Week had evidently slipped. Look to the RBA meeting today which may offer some surprise for markets while due updates on the trade front will also be of interest. Among the markets, look to performance of the Chinese market after the plunge yesterday. The CSI 300 which slipped to close just above 3,650 remains above the January and February lows but may come under threat once again into the end of the week if hit by both April’s trade figures disappointment and US-China talks go into stalemate.

Yesterday: S&P 500 -0.45%; DJIA -0.25%; DAX -1.01%; FTSE +0.40% (Friday)