Asia market morning update - awaiting fresh leads

Can the risk-on atmosphere be sustained?

Wall Street concluded mixed at the start of the week with little to initiate any changes in sentiment. Once again it appears that the week will not quite start until the latter half with the items we are watching. This will perhaps be a good time to ponder over whether the rally we have seen thus far can continue as we watch the likes of the US 500 index trek towards 2018’s all-time high.

As seen from the comprehensive US 500 index’s sectoral performance in the last 1-week, cyclicals had been at the forefront in gains while the defensive lagged with the risk-on mood in markets. This risk-on atmosphere had been underpinned to a large extent with receding growth worries and rising US-China optimism, with the former backed rather strongly of late by the slew of data releases such as last Friday’s jobs report.

Several factors remain up ahead that would likely keep the current rally going in US markets and have positive knock-on effect for Asia markets. Green shoots in the form of data have been ones to alter previous views that the US economy is faring worse than thought while the commencement of the earnings season brings hopes that the market could be receiving better projections even with weak Q1 performance. Likewise in China, which had been a key source of growth woes, further signs of stabilization are expected.

As far as retail contrarian goes, strong net short position on the US 500 remained the case since early this year, one to suggest continued upsides. One caveat in the very near term would be the IMF spring meetings this week that could reintroduce growth concerns with details on the ‘precarious’ global rebound previously outlined by IMF chief Christine Lagarde. Fed minutes expected midweek as well, one to weigh against this.

Asia open

Asia market is look set to start the day with mild gains despite the lack of fresh leads. Some news on trade can be seen passing through on the wires including the US administration proposing tariffs on EU products and the Japanese economy minister said to be planning the first round of trade talks with the US. Risk sentiment however had been little afflicted by the news with USD/JPY (大口） still hovering around $111.45 levels. No surprise perhaps given the current US administration’s tendency to position prior to taking action while the US-China trade talks might be occupying all the bandwidth at present. Look further ahead to the leads into the latter half of the week with a rather empty data docket in the day.

On the local Singapore market, the STRAITS had seen rather measured moves despite the broad gains in the region on Monday with prices meeting resistance. Added caution had likely been the case as well with the Q1 GDP and MAS meeting conclusion due at the end of the week, one that could continue into the week.

Yesterday: S&P 500 +0.10%; DJIA -0.32%; DAX -0.39%; FTSE +0.07%