Trade war noise picks up

Whipsawed by trade messages

Wall Street was seen going through a turbulent session to start the week, guided by the mixed tunes on US-China trade. White House economic adviser Larry Kudlow’s clarification that delisting of Chinese companies is not on the table aided in the respite for equities, only to have the placement of eight Chinese tech companies on a US blacklist, one to topple sentiment once again. While President Donald Trump continues to provide reaffirming messages on trade talks, the abovementioned provocative move does come across as a surprise just ahead of Thursday’s commencement and could be a positioning attempt once again, marking the continued strain relationship between the two sides. While no longer novel, one good news had been the signing of a limited deal between US and Japan and one suspect this may embolden or give confidence to President Donald Trump in his negotiations with China, one to watch.

Risk sentiment can be seen little changed once again using USD/JPY (大口） as a barometer with prices trading around $107.30 levels. The support seen at around $106.74 had been a strong one for prices, although should things take a negative turn, this will be negative for risk and thereby aid with an accelerated drop for the pair. This is further set against the backdrop of a slowdown in economic situation with the World Bank the latest to have warned of dimming global growth prospects that could altogether cause a repeat of the start of October.

Asia open

Despite the poor start to the week for Wall Street, Asia markets had broadly broached Tuesday on a positive note. Having sold off through late September, this positioning ahead of the trade talks suggests that the market is not entirely pessimistic towards the outcome, one for us to watch. China’s return from the weeklong holiday meanwhile saw to little changes in terms of the currency fixing, in line with the expectations that the authorities may attempt to keep things stable ahead of the US-China meeting.

One note, however, is that the Hong Kong market can be seen remaining under pressure amid the domestic unrest. While most of Asia indices remain a distance away from their year-to-date lows, this market may be one coming under added pressure should things take any unpleasant turn for US-China trade. Look to the unfolding of the price action with the Hong Kong market’s return today with the bias on the downside.

Yesterday: S&P 500 -0.36%; DJIA -0.45%; DAX +0.70%; FTSE +0.59%