Financial markets had a treading water look about them overnight after what has been a busy but headline-driven week of volatility. “That” phone call from President Trump to the Ukrainian President, which it turns out, had been moved to a secured server away from prying eyes, had Democrats braying for blood with revenge in their eyes. Impeachments grabbed most of the headlines overnight, but in the bigger picture, had little real impact on markets apart from curbing exuberance on equities.
Like Brexit, the Impeachment of Trump will now become a drawn-out saga that feels like annoying supermarket music. You can’t make it go away, but once in a while, a song pops up, and you sing along as you wander through the fresh veggie section.
Asia has a more exciting day ahead, coming ahead of a week-long birthday holiday in China starting on Tuesday. Chinese Industrial Profits are released at 0930 SGT and are expected to follow last months 1.70% drop with another 2.0% fall. Last months print sparked a rush for the exit doors and a lousy print today could do the same with mainland equities.
Singapore Industrial Production collapsed by 7.0% MoM yesterday highlighting that the effects of the trade war are being felt near and far. Today Singapore releases Bank Lending at 1000 SGT and PPI at 1300 SGT. Both will be watched more closely than usual as nervousness about the trade war’s effects on global growth persists. Last months PPI fell 6.0% YoY, and we expect a similar YoY drop of 5.0% today.
We finally get some tier-1 data from North America tonight with the release of durable goods and personal income and spending. With the U.S. consumer, the last man standing still to take cover from the global slowdown, a poor read from these numbers has the potential to floor equities and end the week on a sour note.
Equities
Wall Street made a lot of noise but didn’t do much overnight as soothing trade noises from a Chinese official partially offset impeachment concerns. The S&P 500 fell 0.23%, the Nasdaq fell O.58%, and the Dow Jones fell 0.28%.
Asia stocks have followed Wall Street lower with the Nikkei 225 lower by 0.60% in early trading. Much will depend on the China Industrial Profits data, with a poor print deepening the gloom across the region. A less worse print is probably only enough to see regional equities mark time until Europe.
Currencies
U.S. yields rose slightly overnight despite heavy demand for the 7-year U.S. Treasury auction. Higher yields were mildly supportive for the dollar which edged higher against its G-10 compatriots. The dollar index rose 0.17% to 99.21.
As it stands the dollar has made significant weekly gains against the Euro and British Pound as well as LATAM currencies, but its gains are negligible against Asian currencies. It goes back to Monday’s thesis that this week would hold lots of noise but little substance, once the dust of the week has settled.
The China Industrial profits data has the potential to weigh on regional currencies this morning as well as AUD and NZD, but otherwise, currency markets look content to await direction from Europe as the week draws to a close.
Oil
By oil’s standards, the overnight session was the quietest in many days with both Brent crude and WTI almost unchanged. A lack of market-moving headlines and no doubt, a lot of frayed nerves, saw Brent crude closed at $62.70 a barrel, and WTI closed at $56.65 a barrel.
With the post-Saudi attack rally almost wholly unwound, the oil markets are clearly more focused on the global growth story rather than the Middle East security one. This is erroneous, in my opinion, but the market is always right. (even when I know its wrong!) Security concerns should ensure that oil is mildly supported in Asia ahead of the weekend. How the week finishes will be dictated by the U.S. consumption data this evening.
Gold
After the breathtaking rally and even more breathtaking sell-off of the past few days, gold flat-lined overnight, finishing unchanged at $1504.00 an ounce. I can hardly blame traders for choosing discretion over valour when volatility is driven by headlines entirely out of one’s control.
Gold is smack bang in the middle of its longer-term $1480.00 to $1530.00 range. It looks set to remain anchored there for the session as markets await more big-picture clarity, after the week’s ugly whipsaw price action.
Pre-weekend risk hedging should mean that Asia will have plenty of interest to buy dips towards the $1500.00 level today.
