US-China face-to-face talk resumes

Wall Street saw early gains, built on the back of the latest Fed cut, wiped into the latter half of the session with concerning news with regards to US-China trade. To some extent the latest updates on US-China officials having met face-to-face in Washington tilts the sentiment back to the positive, one to aid Asia markets, but it once again highlights the fragility of the market sentiment on this biggest risk that persists. The latest meeting is expected to set the stage for the high-level meeting in early October which may keep the market going. Likewise, with regards to the likes of the Wall Street and the S&P 500 index, it may serve as a short-term support for prices. That said, having had past experiences watching things turn sour quickly, managing this risk will be important heading towards that early October meeting expected between key trade negotiators.

Source: IG Charts

Bank of Japan consider October easing

We have seen the series of central bank meeting conclusions this week with mostly rate cuts seen or an apparent easing bias. While we had highlighted the Fed’s mixed outlook on interest rates that deviates significantly from the market’s view, the Bank of Japan (BoJ) had been another interesting one to note. The yen strengthened post meeting with a portion of the market seemingly disappointed with the lack of action in the September meeting, though that had been the consensus. The BoJ did however caveat an extensive review on the ‘economic and price developments’ at the October meeting that prompted the potential easing measures to unfold then. With the meeting lying at the end of the month in October, further insights into the US-China trade relations and thus the yen trajectory is also expected to play a part in whether the BoJ will move and what they will use given their limited toolbox.

This morning had also seen Japan’s August core CPI data slowing further to 0.5% month-on-month, the weakest growth rate since July 2017, though within the market’s expectation. Fort the rest of the day, China’s loan prime rate will be one to watch on the extent of the decline in addition to a series of Fed speakers. Eurozone’s September consumer confidence will also be expected in the day.

Yesterday: S&P 500 +0.02%; DJIA -0.19%; DAX +0.55%; FTSE +0.58