Asia market morning update - assessing growth concerns

Oscillating sentiment

The ebbs and flows of fear continue to guide equity markets in the US with Wall Street concluding higher amid an improved state of concern over growth. US 10-year yields, the single litmus test focused upon for growth woes at present, had trudged back from the 15-month lows to trade just below 2.4% this morning. Just looking at the VIX and you can see the confusion detailed in the swings in the past 5-session period. The market is well cognizant of both the expected slowdown in global growth and the room to go for stock markets prior to a recession based on historical trends. That said, we had allowed the age-old fear-of-missing-out to guide prices in the oscillation as these opposing forces jostle for influence.

While the series of Fed speakers, including New York Fed President John Williams who also used to head the San Francisco Fed, had joined the chorus of reassurances downplaying recession, the overnight data had not been the most inspiring. US Q4 GDP had been a miss, but as said that would be on the backward-looking end. Watch the series of data out of the US in the coming week to assess if convergence with the slowdown in Europe continues. Looking at prices, the likes of the Dow and the S&P 500 index remain in a state of consolidation and it could take some time for trigger to come for a breakout of the zone.

US-China resolution when?

In terms of overnight leads, there had been a fair amount on US-China trade as talks began in China. Statements marking progress in US-China trade talks and Premier Li Keqiang’s jawboning of the market had helped on Thursday, though white house economic advisor Larry Kudlow’s note that the Trump administration is prepared to elongate talks by weeks or months raised questions. It may not be in the market’s interest to see this uncertainty stick around, but the interpretation of the earlier statement had nevertheless been mostly positive with the evident eagerness to see a deal eventually being established, even by means of further delay. Likewise on China’s end, this had been exemplified on Thursday through news of amendment proposals including the touchy issue of technology transfers. Altogether, a stabilization of sentiment surrounding this issue would likely partake in helping Asia markets higher into the end of the week.

Asia open

The abating of growth fears changes the picture for Asia market going into Friday once again. Early movers in the region including the ASX 200 and Nikkei 225 had charged ahead when last checked.

Asia markets would find a series of items to contemplate with this Friday ranging US-China trade updates and the Brexit vote for risk sentiment and the positioning ahead of the weekend PMI release out of China. As far as the consensus goes, expectations are set for improvement in both the official and the Caixin manufacturing reading on Monday. This comes after new orders improved in February’s reading, perceived to mark a bottom. Watch for any caution that could still come through, as noted ahead of previous releases.

Yesterday: S&P 500 %; DJIA %; DAX %; FTSE %