Asia morning update - trade positivity

The latest surge for markets counts the US-China trade optimism as its primary engine with Asia playing catch-up at the start of the week. Having had both President Donald Trump and President Xi Jinping hailing progress made in talks last week, while further talks are expected this week in Washington, the market had certainly been cheering the signs. Despite the lack of details post meeting, there is a growing sense that a 60-day extension to the March 1 deadline for further tariffs implementation could help to ease through the difficulty in reaching common grounds on contentious issues such as intellectual property and technology transfers. With that, Wall Street charged on into the end of the week, coming through to the upper end of the consolidation zone for the likes of the S&P 500 Index. Alongside items such as the Fed, as listed in our week ahead, this week will remain one to watch for reasons to propel the markets further.

Amid an expectedly quiet start to the week, with US markets away on Monday, look to synchronised gains across the Asia region. The local Singapore market will notably be keeping a close eye on the Budget 2019 announcement for any sweeteners to the economy amid a year where growth is expected to slow and a general election impending. Early morning release finds Singapore’s January coming in on the weak side at -10.1% year-on-year after December’s 8.5% slump.

Notably, Asia’s largest bank, DBS Group Holdings announced their Q4 performance this morning with a record performance for 2018 as expected. Fourth quarter net profit at $1.32 billion is reported to be up 8% from a year ago but marginally misses the consensus. No surprise to find the weakness having been underpinned by trading income segment, as detailed in our preview. More to watch in the earnings call to come for outlook and thereby price reaction.

Levels check

S&P 500: Despite a week of mixed economic data indications, the S&P 500 index rode on the US-China trade hopes to end the week with gains. Prices traversed to the upper end of the earlier consolidation zone of between 2628.5 and 2799.2. Look to the Fed minutes this week and further US-China trade developments for trigger towards 2018 highs. Data docket appears relatively empty this week while Monday is a market holiday.

Alongside US markets, a similar theme cuts across to the likes of the local STI, waiting for breakout at present. Look to the Budget announcement and external leads once again.

US Dollar Index: While the search for safety had faltered into the end of the week with the risk-on mood brought about by the US-China trade developments, the US dollar index remain a hair’s length from breaking out on the upside in the current trend. Fed dovishness will be one to be explored this week from their January minutes, one for the greenback to watch for drag.

EUR/USD: A slew of releases in the eurozone this week ranging the German ZEW survey to February eurozone consumer confidence will all be ones to watch. Bias is towards the downside whether from a data-driven perspective or the technical setup on hand.

Brent Crude: Brent crude prices seen edging up close to a 3-month high, evidently with Saudi Arabia supply and US-China trade hopes powering the surge. The inverse head-and-shoulder pattern seen forming, watching further upsides from here.

Friday: S&P 500 +1.09%; DJIA +1.74%; DAX +1.89%; FTSE +0.55%