Asia market morning update - growth concerns interlude

IMF cuts growth, trade tensions rises

As alluded to in our note yesterday, the short-term dampener on growth had materialized in the form of the International Monetary Fund’s latest downward revision in global growth forecast. The third downgrade in six months saw 2019 growth projection lowering to 3.3% from 3.5% in January. Notably, Europe had a significant part to play once again with the 0.3% lowered forecast for 2019. This had perhaps not been a huge surprise for markets following IMF chief Christine Lagarde’s hint on the ‘precarious’ global growth last week, but nevertheless served a reminder of the worries that had accumulated, sending the US 10-year yields trading lower below 2.5%.

Delicate times for markets

The update of this weaker growth forecast for Europe had been untimely coming at the heels of President Donald Trump’s latest tariffs threat on EU goods. The ratcheting of trade tensions had altogether worn down investors’ confidence on Tuesday in the US, seeing the likes of the S&P 500 index putting a halt to the winning streak. Still, prices remain in an uptrend across both the Dow and the S&P 500 index with the momentum going and thus would not warrant a change in course yet.

While the EU had noted that retaliation would be in place, it still remains within the early stages. At $11 billion worth of EU imports currently, it is also a small sum and impact in comparison to the US-China trade dispute, forming about 2.2% of all imports from the EU to the US in 2018.

The fact of the matter is that we also are traversing delicate times for markets awaiting Q1 corporate earnings and guidance in the US commencing this Friday. The lowered volume in the US therefore reflects the inaction within markets. It is hard to tell if we are getting a repeat of the US-China trade war at present, but the Q1 earnings results may well take over the spotlight as we move into the coming week.

Asia open

Amid the sporing of growth and trade tension concerns once again, sentiment in Asia markets have once again been undermined. Early movers in the region have collectively receded though of different extents. The ASX 200 seeing a mild red of -0.2% in the early hours while the Nikkei 225 a steeper -0.8% drop on USD/JPY’s slide to 111.10 levels this morning.

As with US markets, the upward momentum across various indices in Asia such as the Hong Kong Hang Seng Index and the local Straits Times Index remains intact. It will be a packed Wednesday to watch the likes of China’s March loan conditions, the European Central Bank meeting, US CPI and FOMC minutes in the day ahead.

Yesterday: S&P 500 -0.61%; DJIA -0.72%; DAX -0.94%; FTSE -0.35%