Asia morning update - Brexit sentiment

Turning back to brooding over growth, the exhaustion of the optimism from China’s latest stimulus announcement could leave Asia to trade in a mixed state this Wednesday. Turning back to brooding over growth, the exhaustion of the optimism from China’s latest stimulus announcement could leave Asia to trade in a mixed state this Wednesday.

Brexit developments shrugged aside

Plunging like a falling knife ahead of the Brexit vote results, the pound later exhibited the typical ‘sell the news’ phenomenon as it rebounded back to Monday’s levels with the announcement of the landslide defeat for UK Prime Minister Theresa May’s deal. To a large extent, this had also been a result of the bolster from hopes of a no-Brexit as plans of cross-party discussions surfaced. Evidently a no-confidence vote had also been tabled for May’s party, though the market seems to be suggesting this as an interlude in the Brexit piece. This is with parliament members beyond her current support such as the pro-Brexit Tories indicating their backing, that would see to a failure of this no-confidence vote.

As it is, there remains a great deal of uncertainty over the eventual decision as the deadline on 29 March draws near. That being said, beyond the pound we have yet to find significant reactions cutting through. As far as haven assets have suggested, their sensitivity remains towards growth as US bond yields, the yen and gold traded flat overnight. What could carry more weight would perhaps be the set of US data on Friday ahead of more December Chinese numbers next Monday.

Wall Street had likewise shrugged off the Brexit chaos thus far, trading to the tune of the Chinese stimulus on Tuesday and helpful earnings. UnitedHealth Group saw to the healthcare sector coming in first on the S&P 500 while the tech sector had also been a been a strong contender. The latest 1.07% gain for the index marks the seventh out of the latest ten sessions, to find the index stronger.

Asia open

The Brexit noise, while uninspiring, would correspondingly be treated as noise for the Asia open this Wednesday. A mixed situation had been seen for early movers thus far as the ASX 200 and the Nikkei 225 headed in opposing directions, responding mostly to domestic market leads. Some slight yen strengthen pressure this morning following misses in both the Japanese PPI and machine tool orders had dented sentiment and underscored the USD/JPY moves. Expect the rest of the region to trade mixed as the initial cheer towards the Chinese stimulus wear off. The local STI to edge higher as the upward momentum carries it towards the next resistance seen at 3273, though with the imminent breach of the overbought territory, the pace could slow.

Crude recovery

Notably, on commodities, one would notice that crude oil prices rose in tandem with markets on Tuesday. Crude prices may count the Chinese authorities as allies with the latter’s commitment to supporting the Chinese market congruent with the sentiment driving crude prices. The US private API report likewise proved conducive for oil prices with the reflection of a small 650k barrels draw in inventory. Given the huge difference with the official EIA report from last week, however, it would still make the DoE report a risk event ahead of the OPEC report this week.

Yesterday: S&P 500 +1.07%; DJIA +0.65%; DAX +0.33%; FTSE +0.58%