Markets turn lower after US passes HK democracy bill

Wall Street brightness dims

US indices were mildly lower in the Asian morning session, posting losses of about 0.25%. In response to the US passing of the Hong Kong Human Rights and Democracy Act, which would require an annual review of Hong Kong’s autonomy from Beijing to justify its special trade status, China said it would “retaliate”, and do everything necessary to preserve sovereignty and security, which has taken the edge off yesterday’s rally on Wall Street.

The HongKong33 index traded as much as 1% lower this morning, easing back from the near four-week high struck yesterday, following the US move. It’s now back up to just down 0.45%. China shares slid 0.64% after China downplayed the progress in the so-called Phase One trade deal.

HongKong33 Daily Chart

Source: OANDA fxTrade

Boris on Brexit

UK press is speculating the British PM Boris Johnson will brief his cabinet at 4pm local time today and speak with conservative backbenchers later. The passage of any deal through Parliament appears to be dependent on support from Ireland’s Democratic Unionist Party (DUP) with DUP leader Foster saying yesterday that they want a deal, but it has to respect Northern Ireland’s constitutional and economic place in the UK. The Financial Times has said that the DUP have asked for “billions” of cash to support the Brexit proposal.

GBP/USD has eased back this morning, sliding 0.24% to 1.2753 after reaching levels not seen since May yesterday. The pair closed above the 200-day moving average at 1.2714 for the first time in five months.

GBP/USD Daily Chart

Source: OANDA fxTrade

Bank of Korea cuts benchmark rate

South Korea’s central bank joined the growing list of global central banks that are in easing mode, with a 25bps cut to its 7-day repo rate to 1.25% this morning, the second such move this year which pulled the benchmark rate to a record low.  The move had been widely anticipated and comes amid a backdrop of slowing growth and trade frictions with Japan.

In the accompanying statement, the Bank said it will monitor the effect of the recent two rate cuts for the time being, which suggests a period of consolidation, though the accommodative policy stance will still be maintained. In adjustments to its economic forecasts, the Bank said growth will be below its July estimate of 2.2% while CPI is expected to drop below the 0.7% projection rate for a while, but rise to 1% in 2020.

A day of CPIs

The UK publishes producer, retail and consumer price indices for September today while Europe releases its CPI data for the same month and trade data for August. Canada’s consumer price index for September is also due while in the US, September retail sales are expected to rise 0.3% m/m, a slower pace than August’s +0.4%, the latest survey of economists shows.

The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/

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