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Watch for haven moves in the day before the week heats up for the pockets of key releases into the end of the week.
Haven trades
The focal point for markets had been haven trades into the end of last week, with a double dose of jitters ahead of Hurricane Irma’s landfall and speculations of another missile launch by North Korea having the country’s founding day over the weekend. While Hurricane Irma did make a roundabout upon the south-eastern end of US, the market found some relief in the fact that the hurricane had missed the expected category five that would have worsened the damages. The US dollar index exhibited the most apparent reaction, ticking up to 91.50 levels at the start of the week from lows of just above 91.00 on Friday. This could provide some relief for US markets which had been heavily sold, particularly for the insurance related sectors.
Meanwhile relieving the market of the risk-off sentiment had also been the absence of another missile launch over the weekend by North Korea. Expectations have been built over the week for the North Korea to dish another display of military might and the true concern lies with the frowns that would have arrived from neighbouring countries and the US. Havens have thus far retracted from last Friday’s highs with the likes of gold falling back below $1340 and 10-year treasury yields up at 2.09%. Having said this, keeping the concerns alive had been North Korea’s latest warning regarding US’ calls for sanctions with promises of ‘greatest pain and suffering’. The risk barometer, gold, have been stalled by the $1350 resistance once again, watch for a break ahead.
Asian markets
Asian markets are broadly poised for gains this morning, with early movers, including the Japanese market seen with substantial gains this morning. By no means does this trend suggest we are relieved of North Korea concerns, but the anticipation of worsening tensions from last week appears to have been eliminated at the current moment. Watch for the Hong Kong and local Singapore bourses to join in the relief rally.
Separately, the Asian market had also seen a set of positive data over the weekend with China’s inflation numbers arriving above expectations while Japan’s July machine orders also outperformed this morning at 8.0% month-on-month (MoM). With both the CPI and PPI accelerating, underpinned by commodity prices acceleration, the market has certainly seen a good set of numbers in August from China thus far. The heavily watched USD/CNH has so far reversed slightly on USD recovery and the authorities’ nudge after scraping reserve requirements on yuan forwards. One to watch for developments after the strong trend seen of late.
The day ahead places the focus on reactions in US markets following Hurricane Irma while items including Malaysia’s industrial production and a Belt and Road summit draws attention during Asian hours. China’s M2, new yuan loans and aggregate financing will be due any time of the week alongside foreign direct investment numbers.
Friday: S&P 500 -0.15%; DJIA +0.06%; DAX +0.06%; FTSE -0.26%
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