Breather for Asia markets
A mixed commencement look set to be the case for Asia markets with the region caught between anticipating the prospect of rate cuts from the upcoming Fed meeting and US-China trade tensions.
Talking up the G20 stakes for US-China relations
The macro backdrop was little changed for Wall Street overnight seeing markets waiting for direction from the Federal Open Market Committee (FOMC) meeting next week and weighing the tariffs threats from President Donald Trump. The notable new development had been the raising of stakes for the G20 meeting. President Donald Trump on Tuesday was seen brandishing the trade deal covering terms negotiated earlier in the year which he is demanding China to return to. As Bloomberg reported, White House Acting Chief of Staff Mick Mulvaney had perhaps best described the situation suggesting that the Meixco tariffs conclusion had now emboldened the President. Furthermore, the meeting would be an opportunity to resume talks than to see a deal come through as we have suggested yesterday.
Wall Street broadly concluded little changed seeing the Dow and the S&P 500 index ending near neutral despite a positive start. The S&P 500 index can be seen briefly testing the 2900 level but was sold down once again against the backdrop of trade uncertainty to continue with what could be a rangebound trend until greater clarity can be sought.
Source: IG Charts
US CPI watch
Against the current backdrop, some of the recent questions that were posed are as follows.
- Could the markets be pricing in the chance of a Fed rate cut too early?
- Can US-China trade tensions further escalate?
The probability of both the abovementioned questions currently point to a yes, but amid the uncertainty particularly with regards to the latter trade item, the Fed may be compelled to move and that will be the big question going into the week ahead.
The US dollar index can be seen repeatedly testing the uptrend support as the market contemplates the prospects of a rate cut. Watch the US CPI data release this week among other updates including retail sales and industrial production. Unless we see a significant surprise from the 0.2% month-on-month consensus, expect the market to largely trudge along awaiting the Fed’s guidance next week. A miss here could be one to increase the expectations for a rate cut and see prices dip past support.
Source: IG Charts
Asia open
Asia markets are due for a breather alongside the US into this midweek trading day with the lack of fresh drivers. While regional markets saw the boost on Tuesday from China’s support towards infrastructure investment, this may be exhausted into Wednesday to find regional markets trading alongside to their own tune. As mentioned above, watch the US CPI data, but prior to which, China’s May CPI and PPI numbers will be released. In particular, look out for the PPI trend after China’s trade data surprised on Monday for any market repercussions.
Yesterday: S&P 500 -0.03%; DJIA -0.05%; DAX +0.92%; FTSE +0.31%
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Take a position on indices
Deal on the world’s major stock indices today.
- Trade the lowest Wall Street spreads on the market
- 1-point spread on the FTSE 100 and Germany 40
- The only provider to offer 24-hour pricing
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.
