Jump to content

Trader's View - APAC brief 10 Aug

Sign in to follow this  
JasmineC

ASX yesterday: SPI futures have the ASX200 edging slightly higher this morning, following a day in which the Australian market challenged the significant 6300-handle once more. The strong activity perhaps came as somewhat of a shock to traders, given the humdrum session on Wall Street the night before, combined with the floating of several geopolitical risks. Some solid earnings reports set the foundations for the yesterday’s run, namely from financials stocks Suncorp and Magellan; but the real catalyst for the stronger ASX was a general boost to sentiment from a rally in Chinese equities, which added 2 per cent according to the blue chip CSI300 index.

ASX prospects: In what was a slightly disappointing climax to the day, the ASX200 failed to close about 6300, indicating some reservations amongst investors about yesterday’s move. It isn’t the first time that the local market has failed to hold above that level, raising questions about the substance beneath these sorts of moves higher. So far, reporting season has delivered some respectable results, which — assuming if it continues — will give impetus for pushes higher. However, considering the vulnerability in bank stocks owing to tightening funding costs and slow credit growth, coupled with flatness in the materials space due to softer commodity prices and trade war fears, a sustainable move higher in the index must questioned and approached carefully.

1.jpg.7384afaaf1ddd221b2ac05db9a9829a4.jpg

 

Aussie Dollar: The low implied volatility markets, which is at 7-month lows based by some measures, has boosted risk sentiment and supported riskier assets in the past several days. This dynamic was well demonstrated by the Australian Dollar, which saw a flow of speculative trading push the local unit to the very top of its range. The AUD/USD edged close to the top of its range during the Asian session, hovering around the 0.7440-mark for much of the day, and reaching highs above 0.7450. Although the move higher in the Aussie Dollar was slightly counterintuitive given global risks and the matter of unattractive yields, the price action was well within the currency’s recent range. Profit taking from speculative traders has presumably overnight irrespective of this, with the AUD/USD trading around 0.7375 at time of writing.

 

2.jpg.33cee5bc2fedf4d7873a9af17dda0ab4.jpg

 

North America: Wall Street dipped at the North American session’s close, receding for the second day and putting on hold its resolute climb towards record highs. US shares seems to be a little more sensitive to global risks at the minute, pushing traders into safe havens like US government debt, and driving benchmark 10 Year Treasury yields to 2.92%. Furthermore, it was industrial stocks and the US financials lead the market lower – a state of fairs manifesting most in the Dow Jones. In a silver lining to the night’s trade, the ever-strong NASDAQ held its line, coming within around 15 points of it all time highs, galvanized by renewed enthusiasm towards tech stocks. 

US CPI: Some of the bearishness in US markets last night may be attributable to positioning for the release of the week’s major economic announcement tonight: the release of US CPI data. Following on from the overnight release of US PPI figures, which revealed a below forecast number, traders will be digging into tonight’s inflation numbers for signs that the red-hot US economy is showing signs of significant price growth. Although the official CPI print isn’t the US Fed’s preferred inflation gauge, signs of an overheating economy in the form of rapid price growth will weigh on policy maker’s minds, particularly amid only gradual rises in US wages growth.

Greenback: The US Dollar this morning is displaying considerable strength. According to the US Dollar Index, the greenback has wrestled through resistance at 95.40, to trade at 95.60 at time of writing. Currency markets have been awaiting this sort of move for several months, and though it’s too early to say if it will consolidate itself, conventional wisdom suggests it’s a matter of time before higher yields will drive the greenback higher across the board. Tonight’s CPI figures could be the spark that lights the fire, with a break of this resistance at 95.60 opening-up ~96.70 as the next stop.

Data today: In other relevant economic data, both locally and abroad, global traders will be preparing for the monthly release of UK GDP data this evening, while locals will be keeping an eye on the RBA’s quarterly Monetary Policy Statement. The UK’s GDP data will be particularly interesting as it relates to the GBP, particularly the cable, which has come under heavy selling pressure following the BOE’s recent dovishness and heightened risks relating to a Brexit “no-deal”. The GBP/USD has burrowed below a rather firm trend channel overnight, and is flashing signs of being a little oversold: although the trend is irrefutably lower for the Pound, perhaps a bounce in the sterling is on the cards following tonight’s GDP release in a classic “buy the rumour sell the fact” scenario.

 

3.jpg.d88e5fcd537eb14289e5efad50fd3bdb.jpg

 

Please note: This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

 

  • Like 1
Sign in to follow this  


0 Comments

Recommended Comments

There are no comments to display.

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
You are posting as a guest. If you have an account, please sign in.
Add a comment...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • Blog Statistics

    • Total Blogs
      3
    • Total Entries
      439
  • Our picks

    • Are we on the verge of a No-Deal Brexit? - EMEA Brief 21 Mar
      The EU has indicated that Theresa May needs to get backing from parliament on her Brexit deal before they agree to delay the UK's withdrawal from the EU. The Prime Minister is heading to Brussels today for the European Council meeting to try to force an extension in order to avoid a no-deal scenario.
      • 0 replies
    • APAC brief - 21 Mar
      Market action proves it again: this market hinges on the Fed: The US Fed has proven itself as the most important game in town for traders. The FOMC met this morning, and lo-and-behold: the dovish Fed has proven more dovish than previously thought; the patient Fed has proven more patient that previously thought. Interest rates have remained on hold, but everyone knew that was to be the case today. It was about the dot-plots, the neutral-rate, the economic projections, and the balance sheet run-off. On all accounts, the Fed has downgraded their views on the outlook. And boy, have markets responded. The S&P500 has proven its major-sensitivity to FOMC policy and whipsawed alongside a fall in US Treasury yields, as traders price-in rate cuts from the Fed in the future.


      The US Dollar sends some asset classes into a tizz: The US Dollar has tumbled across the board consequently, pushing gold prices higher. The Australian Dollar, even for all its current unattractiveness, has burst higher, to be trading back toward the 0.7150 mark. Commodity prices, especially those of thriving industrial metals, have also rallied courtesy of the weaker greenback. Emerging market currencies are collectively stronger, too. This is all coming because traders are more-or-less betting that the Fed is at the end of its hiking cycle, and financial conditions will not be constricted by policy-maker intervention. Relatively cheap money will continue to flow, as yields remain depressed, and allow for the (sometimes wonton) risk-taking conditions that markets have grown used to in the past decade.
        • Great!
        • Like
      • 0 replies
    • APAC brief 20 Mar
      Another trade-war headline downs sentiment: There’s some news floating through the wires that sentiment has taken a hit overnight courtesy of some unfavourable trade-war headlines. It’s been reported that Chinese officials aren’t co-operating with their US counterparts, as it applies to certain sensitive elements of trade-negotiations. The S&P500, which had been developing some intraday momentum prior to the release, has retraced throughout trade, consequent to the news. It’s closed flat for the day, but despite this fall, moves in rates and bond markets suggest the fundamentals currently remain the same. The all-important balance between financial conditions and growth expectations is still there, ultimately supporting the bullishly inclined, as markets now prepare for tomorrow morning’s meeting of the US Federal Reserve.


      The unresolvable issues: It’s perhaps an assumption alone, but the (very vague) report leaked to the market about trade negotiations surely pertains to one of the well-understood, seemingly intractable issues embroiling the US and China. Those, at its core, unrelated to economics, but to strategic, and somewhat philosophical differences. These are intellectual property theft, currency manipulation, and Chinese military posturing in the Asian region – especially the South China Sea. These differences are relevant because they boil down to brutal power-politics, and an essential clash of ideologies. This isn’t to suggest a trade-deal, and future bilateral cooperation can’t exist between both parties; but that whatever deal is struck, it’s unlikely to put an end to geopolitical tensions.
      • 0 replies
  • Latest Forum Topics

×
×