Sentiment driven markets

Record high for Wall Street

Alas, the comprehensive S&P 500 Index printed a fresh record high at the start of a new week. One would recall that it had not been long since overt concerns over an US recession had been the case, and these worries evidently lingers.

That said, the lack of earnings disappointment against the current low bar, soothing views on geopolitics and expectations for a Fed cut this week had remained the drivers for the current market behaviour. President Donald Trump’s latest remark on US-China trade had suggested both success in scope and progress of the ‘Phase One’ deal. This is through stating that it is ‘a very big portion’ and the parties are ‘ahead of schedule’. While this evidently remains very ambiguous, the market did not seem to mind grasping at straws. Counting down to the expected signing of the trade deal at the mid-November APEC summit in Chile, the positive sentiment may continue to be kept rife.

Note that with the break of the 3025 strong resistance at the third try, the uptrend for the S&P 500 index can be seen renewed going towards the turn of the month. For this immediate week, we will still see a string of earnings to scrutinize while the Fed’s guidance post their widely expected rate cut this week will also play an important part.

Central bank watch

As told above, there appears to be no denying of this positive sentiment that had been manifesting across asset classes. The FX risk barometer, USD/JPY (大口） had likewise picked up to chart a fresh high since May 2019. Prices can be seen testing the $109 level when last checked. Both the Federal Reserve and the Bank of Japan (BoJ) are due to update their monetary policy this week. While the Fed is widely expected to lower rates by 25 basis points, the BoJ is seen with less certainty of further monetary policy easing and that provides further upside potential for USD/JPY should we see any moves coming through. This bias alongside the sentiment improvement could keep USD/JPY supported in the near-term, not to mention from a technical view, prices had also broken above the $108.83 strong resistance on hand, opening up the room to the $110 handle.

Asia open

Inspiration for Asia markets stems from the record high on Wall Street this morning, and little appears to be in the way this Tuesday to derail that wave of positivity. October’s Tokyo core CPI arrived this morning missing the consensus at 0.5% year-on-year. While the nationwide number, released after the Tokyo figures, is usually watched with greater interests, a miss here despite the sales tax hike appears to be rather significant. This lack of inflation could be taken in to account by the BoJ and to fuel a move this week, one contributing to the USD/JPY gain on hand.

Quiet session up ahead for Asia in terms of data but expect markets to continue scrutinizing earnings coming through while the anticipation goes on for the string of central bank meeting updates from Wednesday.

Yesterday: S&P 500 +0.56%; DJIA +0.49%; DAX +0.37%; FTSE +0.09%