Asia market morning update - jobs report ahead

Energy sector weakness

Fresh leads from the overnight session had been scarce with the attention being veered towards Friday’s labour market update following the passage of the Fed meeting. Amid the pressure that continues to build for the broad market, the polarizing moves between the energy and financial sectors had been two themes hard to miss.

In particular, the energy sector on the S&P 500 index plummeted 1.71% in the overnight session alongside a brief trip for WTI futures down to sub-$61 per barrel. This also marks a 1-month low for prices in trade. Following the release of the 9.9 million barrels surprise build-up in US crude inventories, marking a new high since September 2017, the reflection for the market had perhaps been prices running ahead of itself earlier with the news of the tightening of Iranian sanctions. Not to forget, on the OPEC front, the likelihood of an increase in output is also not ruled out. Altogether, this builds up the short-term pressure here for prices that have had a good run thus far. On an intraday basis, look to pressure for the sector within Asia markets into the end of the week.

US dollar up

Meanwhile on FX, buying of the US dollar continued into the Thursday session seeing the US dollar index retracing recent losses. While the upward momentum had been built with the market pulling back from the overt easing bias post the FOMC meeting, the steady climb in US treasury yields had also been one to help lift prices. As said in our note yesterday, the neutral tone from the Fed serves little more than reinforce the expectation for steady interest rates through 2019 for the data-driven Fed. For inflation, a part of the Fed rate equation that had been elusive for so long, assigning a ‘transitory’ descriptor adds little clarity in the direction where it is going.

That said, the end of the week may offer a little more update to drive trade in the FX market. For one, a series of Fed speaker including Fed vice-chair Richard Clarida will be expected on Friday. The vice-chairman’s comments on ‘insurance cuts’ had been one to stoke speculations and any further clarifications could again guide trade here. There is a small chance we could be seeing more dovish rhetoric to drive trade, one to watch amid the build up of expectations for a strong set of payrolls and wage inflation that had also been inviting the US dollar bids.

Asia open

Amid the slide seen on Wall Street and expectations for a strong set of jobs numbers, Asia markets look to mostly trade cautiously into the Friday session. Early movers in the region had so far seen diverging movements with the ASX 200 in moderate green and the KOSPI otherwise. Once again, China and Japan remain away on Friday that could make for thin volume while the lack of leads in the Asia session could also see to low participation. The focus, as said above, is shifted ahead to the US labour market figures for trade alongside the slew of Fed speakers post-FOMC meeting.

Notably, for the local Singapore market, UOB was seen with positive results this morning following in the footsteps of DBS Group Holdings earlier. Reactions may however be limited after seeing the surge across the sector at the start of the week upon DBS’ release.

Yesterday: S&P 500 -0.21%; DJIA -0.46%; DAX +0.01%; FTSE -0.46%