Asia market morning update - awaiting the Fed

Fed focused markets

Recapping last Friday’s action, the US market had continued to climb on Friday amid the lack of fresh leads. With the gains of about 0.5% between the Dow and the S&P 500 index on Friday, the indices had risen 1.57% and 2.89% respectively through the week.

Leading the gains on the S&P 500 index had been both the tech and consumer sectors in Friday’s session, the latter helped by the better than expected University of Michigan consumer sentiment reading. Meanwhile, February’s industrial production had been another miss at 0.1% month-on-month, taking a thump on industrials. That said, with the focus clearly shifted to the flavour of the new week which is monetary policy, this Fed release miss again hits the nail on the head in reinforcing the expectation for dovishness from this week’s Federal Open Market Committee (FOMC) meeting, and thus lifting the markets.

Asia open

As told in our Asia week ahead note, a slew of central bank meetings are expected to take the spotlight alongside Brexit development in Europe for global equity markets. The key for Asia is expected to remain with the Fed, monitoring the trickle-down effect on monetary conditions for the region. Look to this to support Asia markets going into the week amid the lack of fresh leads over the weekend, particularly on the US-China trade end after last week’s announcement of delay in the Trump-Xi summit to at least April.

Notably, this morning saw Singapore’s February non-oil domestic exports (NODX) surprising on the upside at 4.9% year-on-year with the exports to most top destinations, particularly China, Hong Kong and the US, helping to boost the reading. The is set against the market’s -3.4% consensus and a weak January read of -10.1%, perhaps dispelling some of the earlier concern that February would be underscored by another weak showing, one to aid the local Singapore market into the relatively quiet Monday session.

Levels check

Dow: Last week’s climb for the Dow had seen prices surging back above the 76.4% Fibonacci retracement level, though prices still fell short of the February highs. As told above, the focus is with the FOMC meeting this week with broad dovishness expected from the Federal Reserve to be supportive. The risk is with any greater-than-expected number of hikes seen for 2019 from the Fed’s dot plot that could put US markets at risk for dips.

XLK ETF: Being particularly sensitive to the Fed’s interest rates, the tech sector will be one worth watching this week. As it is, the climb on the likes of the XLK ETF had pushed prices to a six-month high as momentum wavers and the RSI reflects a breach into overbought territory.

USD index: The US dollar index pared back some strength in the previous week, awaiting the dovish Fed to some extent. Support comes in at 95.58, ahead of the uptrend support as per the below, watching the Fed up next.

Brent crude: Crude prices remain holding steady at around $67 for Brent with little changed by means of outlook. Amid the vacuum of news on US-China trade progress, OPEC and co. had been seen divided on the extension of their supply curb over the weekend, providing little direction for crude prices. Look to that continued consolidation at present.

Friday: S&P 500 +0.50%; DJIA +0.54%; DAX +0.85%; FTSE +0.60%