Mixed tune for Asia markets

Fed cut doubts

Wall Street’s continued stride towards a fresh record close for the likes of the S&P 500 index had no doubt been a positive lead for Asia markets going into Wednesday, but one would note the bond market telling of a very different story. US 10-year treasury yields were seen returning to levels below 2.0% into Wednesday following doubts arising on Fed cuts from Cleveland Fed president Loretta Mester’s comments. The Cleveland Fed noted the fact that ‘cutting rates at this juncture could reinforce negative sentiment about a deterioration in the outlook even if this is not the baseline view’. This had perhaps been a very pertinent point, particularly with the market finding the lack of borrowing underpinned to some extent by concerns of growth slowdown going forward.

In turn, the CME FedWatch tool had registered a tick down in bets for a rate cut by end-July, though still holding a strong 74.4% conviction for a 25 basis points cut. The US dollar index likewise saw a mild slide overnight. Look to the jobs data into the end of the week to continue shaping views on Fed rates with the private ADP one to pre-empt the data in the day. The current market consensus points to a 140k addition after the 27k disappointment in May.

Sell the OPEC news

Meanwhile, following the OPEC+ meeting that affirmed the supply cut extension by nine months and a significant crude inventory draw in the US according to the API report, crude prices saw to a drop which was likely a result of profit taking. While crude oil prices had supply factors including concerns over geopolitical tensions aiding some of its recent gains, demand looks to ultimately plays a bigger part as it had been since the start of 2019. Prices may have found somewhat of a floor of around $60 for Brent crude but further upsides will have to look to the resolution of US-China trade among others to inspiration.

Source: IG Charts

Asia markets in idle

Amid the mixed leads in store for Asia markets, look to a seemingly muted session ahead watching the series of indicators. Early movers in the region have traded mixed this morning with the ASX 200 up 0.3% while the Nikkei 225 in red. As told above, the slight lift in doubts of a July Fed cut had been one to place pressure on Asia markets.

Look to the imminent release of China’s June Caixin services PMI while the local Singapore market will also have its June manufacturing PMI after the market close.

Yesterday: S&P 500 +0.29%; DJIA +0.26%; DAX +0.04%; FTSE +0.82%