Doubts cast over US-China trade-talks, traders focused on growth data today

Risk appetite continues to wane in markets

Global markets continue to wait with bated breath the next major trade-war development. Last night, the news wasn’t positive, with reports flowing that US and Chinese negotiators had hit a road block over agricultural purchases. Attention was also firmly on US economic fundamentals overnight, as CPI data and a testimony from US Fed Chair Jerome Powell affirmed the view the Fed is on pause. The RBNZ also kept interest rates on pause yesterday, defying market expectations. The ASX 200 is expected to open 20 points higher this morning, ahead of a day focused (again) on the labour market, as well as a handful of major global economic releases.

US and China still not there yet on a trade-deal

Nervousness is growing that history could be repeating itself in US-China trade-talks. Dow Jones Newswires reported late in US trade that American and Chinese trade negotiators have hit an impasse over the matter of purchases of US agricultural goods, along with the matter of forced technology transfers in China. US stocks pared early gains on the release of news, as doubts begin to emerge about the feasibility of a “phase-one” trade-deal. Once again, it would seem the US and China are playing a game of chicken in trade-talks, with one or the other likely needing to back-down to get any sort of a deal done.

Fed likely to hold steady, but remains on standby

Those reports drew attention away from what was supposed to be the night’s biggest story: US Fed Chair Jerome Powell’s testimony before US Congress. To be fair, the event, as its often wont to be, was a something of a snoozer. Chair Powell reaffirmed his stance that the US economy is in a good place, but the Fed stands ready to act, if necessary, to support its expansion. Fed Chair Powell also noted the subdued inflation pressures in the economy as reasons for keeping policy accommodative, with US CPI data earlier in the day showing that, at 1.8%, price pressures in the US economy remain “mute”.

RBNZ surprises markets by keeping rates on hold

The RBNZ shocked financial markets by unexpectedly keeping interest rates on hold at its meeting yesterday. A cut from the central bank was considered a 70% chance leading into the meeting. The often mercurial RBNZ opted to defy market expectations, leaving rates unchanged, citing that further monetary easing isn't justified given its employment and inflation targets are broadly being met. The RBNZ has seemingly joined the club of central bankers in "wait-and-see" mode now, with markets pricing less than 40% chance of a cut next year. The news saw the NZD/USD fly yesterday, to climb above the 0.6400 handle once again.

ASX200 expected to edge higher at the open

This morning, the ASX200 is expected to jump around 20 points higher out of the gate, even despite Wall Street’s mixed day’s trade. It will back up a day in which Australia’s benchmark index shed 0.8%, brought about, in part, by nervousness regarding US President Donald Trump’s hostile language towards China in the night prior’s trade, as well as growing anxieties about the escalating violence in the streets of Hong Kong. Though it has been a sluggish week for the ASX200 so far, momentum and trend still point to the upside, with the 6775/80 mark remaining the key technical hurdle right now.

Jobs report to garner attention this morning

In today’s session, all eyes will be on Australia’s jobs report, to be released this morning. Backing up from yesterday’s disappointing, albeit at-forecast, wage growth data, traders will be perusing today’s jobs numbers for clues regarding whether the economy still possesses the oomph to soak up spare capacity in the labour market. The RBA is most-certainly in the “wait-and-see” club presently on monetary policy, but their policy bias remains pegged to health of Aussie employment. A miss in today’s employment data would likely see the odds increased of another rate cut from the RBA in 2020 – something that’s only considered a ­fifty-fifty chance currently.

Global economy in for health check today

For broader financial markets, trading will be sent running the symptom-checker over the global economy. Several significant data releases are published today, and will be used to test the credibility of the view that the recent slowdown in global economic activity is bottoming out. China’s monthly data dump comes out this afternoon, before German GDP will capture the focus. The latter will be of special focus, because it’s expected to reveal Germany entered a technical recession last quarter. Forever forward looking, however, markets will be looking past the top line figure, and searching for clues in the data that things, as expected, ought to turnaround from here.