Mood lightens for Asia markets

Sentiment improved with the US session as the Trump administration attempted a clarification on reports of targeting Chinese capital and trade talks are confirmed for next week, though Asia markets are broadly expected to chart its own course into Tuesday.

King dollar reigns

Moderate gains were seen across the likes of the Dow and the S&P 500 index overnight and likewise for USD/JPY (大口）, which saw prices popping back above the $108 level into Tuesday morning in Asia. This lightening of the mood is apparent through the comprehensive S&P 500 index where all but the energy and financial sectors rose at the start of the week.

Going into the Asia session, however, one would continue watching that greenback strength with the US dollar index, measured against six major currencies, last seen charting a fresh 2019 high. As it is, USD/SGD had continued to remain supported at around $1.3820 in its uptrend and awaiting other USD/Asians to likewise reflect that upward bias into Tuesday.

Despite the Fed cutting rates, political noise and some semblance of mixed data indications were out of the US last week, the king dollar appears to be holding on to its strength. Most of this trend may have the diverging economic fortunes between the US and the likes of eurozone and Asia to count on, but it does appear that the monetary policy difference may be one to continue driving the trend this week. The series of data and Fed speakers are broadly not expected to further fuel rate cut expectations this week, one to keep the USD buoy. At the same time, the session ahead would have the likes of the Reserve Bank of Australia (RBA) expected to lower rates by 25 basis points, which in itself may fuel further dovish expectations into year-end. Look to any AUD/USD move with prices last seen oscillating 0.6750 just above support.

Asia open

Following the better-than-expected manufacturing PMIs out of China on Monday and the moderate improvement in sentiment overnight, Asia markets may find some support going into Tuesday. This may help to curb the downtrend we have seen for the MSCI Asia ex-Japan index thus far into end-September. China and Hong Kong markets will be away on Tuesday with China’s 70^th National Anniversary, one to watch for further protests in Hong Kong that could influence markets in the region.

Separately, Japan’s Tankan, or business short-term economic sentiment survey, was seen worsening though not as steep as expected. Large manufacturer’s index slipped to an index figure of 5, lowest since Q2 2013, though the market was expecting a mere 2. Little reactions were seen across the market, not a surprise here given the broad expectations of this trend in recognizing the heightening risks across the globe.

Look to the series of manufacturing PMIs releases out of the Eurozone and US post the RBA meeting decision today while the key data release is likely to be the September’s ISM manufacturing out of the US with improvements expected from prior.

Yesterday: S&P 500 +0.36%; DJIA +0.50%; DAX +0.38%; FTSE -0.24%