Mixed Asia markets ahead of Fed

Fed disappointment fears

As it is, there remains a sense of fear that the Fed may likewise moderately disappoint as the European Central Bank did last week that had seen the likes of the comprehensive S&P 500 index ending with a mild red at the start of the week. A clear preference for the defensive sectors had also been shown with the utilities and real estate sectors leading gains for the few and far in between.

After ECB President’s less dovish than expected rhetoric tailed the meeting statement last week, the concern resides with a repeat for the Fed. With the market pricing in at least one more 25 basis points rate cut post the July move and before year-end, any less than dovish guidance from either the meeting statement or Fed chair Jerome’s speech could therefore set the market up for disappointment.

While the Fed is evidently expected to continue holding the stance to ‘act as appropriate’, it may not be enough for the market and that had certainly seen to such a downward bias for the equity space into the meeting. Even if further cuts may eventually come along, the short-term one-week outlook for the market ceases to be a positive one on account of the Fed. For the greenback, however, the US dollar index, which is measured against six major currencies, had been strengthening on this bias through the start of the week. Prices look to be attempting a break of the highs printed earlier in May where strong resistances reside. Any break on the upside could see prices retracing some of the gains even as the uptrend is kept. One to watch.

Source: IG Charts

Asia open

Amid the anticipation for the string of event risks this week, Asia markets look to continue trading mixed going into Tuesday. The Bank of Japan concludes their meeting in the day with no change to monetary policy expected and likely keen to maintain flexibility just ahead of the Fed update. A dovish stance will nevertheless be kept status quo seeing the likes of this morning’s June industrial production disappointment reflecting the slowdown.

Look to a mixed trend for Asia markets with eyes on the BoJ meeting. Positioning ahead of China’s July PMI release should also be watched for Asia markets in the day, particularly for the likes of the Hong Kong market plagued by the additional concern of domestic disruptions. US July consumer confidence will also be amongst key data to note this week on the health of the US economy to influence rate cut convictions.

Yesterday: S&P 500 -0.16%; DJIA +0.11%; DAX -0.02%; FTSE +1.82%