Temporary trade relief for asia markets

Trade negotiations in focus

It appears that we have a risk-on mood back in markets with hopes of the US-Mexico trade talks fuelling the onset. Mexico’s ambassador to the US was noted to reflect that negotiations between the US and Mexican officials, which resumed on Thursday, had gone well, while reports on the US contemplating a delay to the tariffs on Mexican goods set for June 10 had also erased some of yesterday’s drag from the issue. It is perhaps not distant memory seeing this kind of back and forth on trade that certainly creates doubts for this relief rally.

Addressing the bigger elephant in the room, the US-China trade issue may have more at stake in the G20 meeting coming up after President Donald Trump expressed that he will be deciding on further tariffs on Chinese goods post the meeting. While it remains to be seen, the President had also mentioned that he will be convening with Chinese President Xi Jinping, perhaps one to watch for signs of a repeat of the last G20 trade truce. The chances are broadly viewed to be slimmer this time, however, given the resolution both sides are showing in holding their grounds.

The intraday influence from this lightening of the mood surrounding trade tensions had nevertheless been one to inspire gains for Wall Street and even crude oil prices alike. The S&P 500 index can be seen back above its 100-day moving average in this reversal, though as said above, this is the reflection of a temporary relief and would require something more concrete to continue the trend. Focus on the US labour market data on Friday, as suggested yesterday, whereby any signs of disappointments similar to the ADP reading may build expectations for the Fed to shift interest rates lower given their mandates to look after employment and prices for the economy.

Source: IG Charts

Asia open

Lighter volume could be seen in the day with various Asia markets including the likes of Hong Kong, China and Taiwan being away while Indonesia remains so until next week. Early movers had as expectedly tailed the US in gains as can be seen with the ASX 200 and Nikkei 225’s 0.4% upsides. Amid a light data day for Asia, focus on the labour market update.

Meanwhile the temporary relief spreading across markets at present had provided USD/JPY (大口） with some support, but the risks may nevertheless be attuned to the downside. Read more on our view here.

Source: IG Charts

Yesterday: S&P 500 +0.61%; DJIA +0.71%; DAX -0.23%; FTSE +0.55%