Asia markets bound by growth concerns

Yield curve inversion

While Asia markets had been broadly mixed on Tuesday, shrugging off the comments from President Donald Trump on the US being ‘not ready’ for a trade deal with China, Wall Street had traded to a largely different tune returning from the Monday holiday. Jitters over growth concerns amid the expected prolonging of the current US-China trade friction saw to bids in the US treasury market. This had seen to the US 10-year treasury yields falling to the lowest level seen since September 2017. As for the 3-month/10-year yield curve, it had waded deeper into inversion as shown in the chart below, igniting worries of recession. Across the broad-based S&P 500 index, no sectors had been spared in the sell-off on Tuesday.

Notably, this had taken place despite the surprise in the early May showing of the US conference board consumer confidence index. The figure had risen to a 6-month high of 134.1, above the 130.0 consensus suggesting that the resilience of the retail sector despite the eruption of trade tensions. That said, this remains an early reading of May’s showings and perhaps the likes of China’s PMI numbers on Friday across the Pacific can be a better reflection of the initial tariff impact.

Source: Reuters

Asia open

Asia markets had largely commenced the session in red this morning, no surprise given the onslaught of worries setting in with regards to growth. As told above, the first of May’s indicators from China, the official PMI, could be a telling reading as to where growth is headed, one to watch. In the meantime, however, we are getting a relatively empty data docket once again this midweek.

Notably this morning saw to the US treasury department releasing their semi-annual foreign exchange report. To some extent, the sparing of China as a currency manipulator had been expected but provides some relief for one watching the US-China trade impasse. The US dollar index had correspondingly edged down slightly from the gains clocked yesterday. A realization of the labelling would evidently have triggered further fury from China and allow room for the US to implement more tariffs according to the announcement that pre-dated this release. China nevertheless remains on the watch list as with new additions mostly from Asia.

One thing to note for the local Singapore market, prices can be seen trading firmly below its 200-day moving average and also coming to the strong support at around 3150, perhaps one to be cautious about into a day expecting red across the market.

Source: IG Charts

Yesterday: S&P 500 -0.84%; DJIA -0.93%; DAX -0.37%; FTSE -0.12%