Asia morning update: Thin markets to start the week

Asian markets could find a lack of leads at the start of the week with mixed returns expected.

US leads

US markets were seen broadly flat on Friday with light volumes coming through ahead of today’s Memorial Day holiday. Prices on the S&P 500 index had flatlined around 2415.0 levels after touching an all-time high, only on Thursday, at 2418.71. A shift of focus to the CBOE volatility index (VIX), which tracks the implied volatilities of options on the S&P 500 index, finds the ‘fear gauge’ sliding to a 2-week low on Friday. Indeed, against the backdrop of benign growth expectations for the global economy and a good run for prices last week, the market appear to thrive in a state of calm. Adding to this development had been the dissipation of political concerns in the prior week.

Digging deeper into the currency market, one could sense otherwise with regards to the abovementioned tranquillity. The latest CFTC Commitment of Traders (COT) report was seen reflecting a significant reduction of net bullish positions of the US dollar, down to the lowest level since September 2016, while the likes of the EUR, GBP and JPY gained against in the USD. The market could even be seen turning to gold as gold speculators reversed to build up net bullish positions. Latent concerns with regards to politics could surface this week as President Donald Trump returns to Washington from his first overseas tour. Newfound attention had also been drawn onto the President’s advisor, Jared Kushner, and his communications with Russia. In addition, we could also be seeing Friday’s US payroll numbers on elevated importance after the set of mixed from US data in April.

Asian markets

Thin markets are expected with onshore markets in China and Taiwan closed for market holiday. A mixed start could be seen for Asian markets this morning, with muted changes expected for key markets. Early movers in the region have seen moderate movements with Japan’s Nikkei 225 in mild gains from an uptick in USD/JPY. Notably, USD/JPY have been nicely sandwiched between the 100- and 200-day moving averages of late. North Korea’s latest missile firing this morning appear to have garnered little reaction from the markets. Opening calls for Hong Kong and Singapore markets are finding near neutral returns likely, with China’s PMI figures due later in the week to be the focus ahead of US May NFP.

A relatively quiet start to the week is likely to be the case with no tier-1 data expected in the day. Focus on the keynote address by San Francisco Fed President John Williams in Singapore at 9:15am local time. UK Prime Minister Theresa May’s TV interview alongside key opponent in the upcoming general election, Jeremy Corbyn, is also expected to be keenly followed.

Friday: S&P 500 +0.03%; DJIA -0.01%; DAX -0.15%; FTSE +0.40%