Slow Monday Start
Risk assets pulled back modestly at the start of the trading week. Political turbulence in US, China, UK and Middle East has come at a time when the global growth outlook appears fragile. Asian equity markets are mixed although skewed slightly to the downside. The positive Hang Seng open is surprising considering the escalations in Hong Kong protects. Crude prices are lower as Saudi Arabia is restoring oil productions at a faster rate than anticipated. Stealing the headline form mixed economic data, UK PM Johnson was forced to return to Parliaments following the Supreme Court ruled Prorogation was illegal. Concern over whistleblower companies against US president Trump, which trigger the Speaker of the House Nancy Pelosi to launch an impeachments inquiry, has been reduced, isolated to the political realm. Finally, on a positive note, high ranking diplomat from China indicated the countries wiliness to purchase more US products and comments that trade talks would yield solid results. Yet, Trump tweet that suggested the US could limit China’s companies’ access to US equity markets has added a bit of confusion. USDCNY drifted around 7.13 area.
China Data
On the economic data front China Sept manufacturing PMI recovered but remained in contraction territory. An official gauge of China’s factory activity manufacturing PMI rebounded to 49.8 in September from 49.5 in August. New export orders, a reliable indicator of external demand, increased to 48.2 from 47.2 in August, while import orders, an indicator of domestic demand, recovered to 47.1 from 46.7 a month earlier. The data was mildly positive however, the broader trend remains worrying. US-China trade war continues to take a meaningful toll on the Chinese economy. A strong US economy and an easier monetary policy will be used by Trump to continue with aggressive trade policy. However, we have seen that antagonistic trade decision which generates a market impact often tempter Trump initial behavior. The market’s sensitivity to Trump’s trade policy via tweet creates a balance to extreme hawkish trade rhetoric. Combined with the balance fed speak suggest that equity markets upside is limited. FX Markets were uninspired as USDNZD falling 0.49% overnight as the Kiwi reflecting the softer Chinese data and burden of the US-China trade war.
