Asia morning update - Eurozone, US data disappoints

With the release of a string of weaker-than-expected data overnight, the market appears to again be questioning the current recovery rally. December’s durable goods, an interpretation of business investments, arrived weaker than expected at 1.20% month-on-month, once again showing further signs of the uncertainties impacting businesses. This was flanked by disappointments in Markit manufacturing PMIs across the eurozone and the US, the former sliding into contraction territory for the first time since mid-2013. EUR/USD, however, showing little changes from yesterday, still oscillating $1.1340 as we pen this.

It had not helped with several earnings disappointment and US markets meeting key resistances. The S&P 500 index notably seeing rejection ahead of the 2800 handle as prices threatens to enter overbought territory. Likewise on the Dow, prices had reversed ahead of the 26,000 level awaiting the next trigger. Into the end of the week, all eyes are set again on the US-China trade talk conclusion from Washington. The base case scenario would be an announcement for an extension to the March 1 deadline for tariffs implementation, or at least the suggestion of which, which may have all been fully priced in at this point of time. Until further breakthroughs are seen, trading the range may be the way to go.

Asia markets are set for broad declines into the Friday session, with the abovementioned weakness in data one to undermine sentiment. On the pertinent US-China trade issue, reports that the two sides have been outlining commitment in principles for a deal marks the progress seen, though scepticism as to how prolonged the process could sustain curbed the enthusiasm. The holiday delayed EIA report in the US also provided another high frequency update on rising crude inventory as output struck a 12 million barrel per day record, one to batter energy stocks in the region with the lower crude prices.

Early morning release saw Japan’s January inflation hitting bull’s eye with core CPI at 0.80% year-on-year, accelerating slightly from 0.70% in December. No prominent reaction seen in USD/JPY (大口） as expected, one still trading against the backdrop of BoJ’s dovishness.

Separately, this morning saw OCBC and UOB earnings arriving mixed. While UOB delivered largely in line with consensus, OCBC ‘s profit was noted to be down 11% from a year ago, casting a drag on the local STI.

Yesterday: S&P 500 -0.35%; DJIA -0.40%; DAX +0.19%; FTSE -0.85%