Asia Market Update :echoes of October past

Asia Markets 

Asia shares are trading lower this morning led my losses on the Nikkei which is down 1.4 % ahead of a supplementary budget but the usual themes are weighing on local sentiment. Concerns over China -U.S. trade tensions, a possible slowdown in the Chinese economy and higher U.S. interest rates continue to sour market views as domestic investors are better sellers than buyers of risk, despite  US market showing signs of stabilizing on Friday. Indeed the fear around US tariff increases due to take effect in January 2019 is factoring. And when compounded by the Bank of Communications suggesting China home prices are likely to fall in the next two quarters will indeed weigh on China markets. Indeed echoes of October pasts are reverberating across global capital markets.

Oil Markets update

After the initial spike higher on Saudis threat to hit back again any sanctions news, markets are settling in as the duelling narratives unfold. The lack of a current fundamental supply deficit in oil markets as supported by International Energy Agency monthly Oil Market Report indicating global demand is lower and terming supplies “adequate for now” Versus the spare production capacity argument especially if the market underestimates the supply crunch from Iran sanctions and Venezuela production. But let’s face it, we are little more than on supply disruption for prices shooting higher over the near term with traders now eyeing Libya after the NOC  warned of a possible closure of Zawiya refinery if security is not shored up.  The markets continue to trade gingerly with a positive bias as the Saudi narrative unfolds with Saudi suggesting $200 per barrel Oil not out of the question.

Gold Markets

Gold remains supported by escalating Geopolitical tensions as smouldering embers in the Middle East are yet set to ignite again on the latest Saudi developments. Adding the mix is the though may consider pausing their widely expected rate hike in December if global equity markets continue to falter. But an abrupt shift in Fed policy will likely lead to a lack of confidence in the worlds most important central bank and could destabilize markets further.

CNH

Focus back in the CNH has Pboc suggests there is plenty of room for monetary policy adjustment amid trade war. But tempered rhetoric by suggesting the currency was near fair value.

Reuters

They Yuan is fixed firmer than expected, however, and the market is not taking USDCNH higher.

Malaysia

China has agreed to purchase 500K tons of palm oil, which should support those local constituents on the Bursa Malaysia. No currency reaction to this news so far.

Brexit

So much for the defining moment in the Brexit negotiations after a tense standoff overnight, PM May sent Brexit Secretary Dominic Raab to Brussels, who then hightailed it home after only 1 hour after meeting with Barnier. The Pound has traded lower but finding tentative support around 1.31 as the Brexit roller coaster continues.

German Politics 

Perhaps flying under the radar Angela Merkel’s sister party has suffered massive losses in Bavaria’s state elections, exit polls suggest, in a blow to the German chancellor. The Euro hasn’t reacted to much to this news as I suspect dealers have bigger fish to fry as Italy’s budget is set to be offered up to the EU committee.

Rethinking it

Echoes of October pasts are reverberating ( OANDA Trading Podcast with BFM89.9)

Join me live discussing this morning Asia open at 12:15 PM SGT on  WATCH FRANCE 24 LIVE

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes
Stephen Innes

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