US/China trade sensitivity
Market sensitivity to broader US/China trade developments are expected to pick back up with a light calendar on the cards this week and after calmer times last week. A few things to look out for include “principal level” talks set to get underway at some stage between the sparring nations and US VP Mike Pence’s policy speech on China due Thursday, October 24. Follow through on Trump’s “substantial phase 1” deal still remains uncertain given conflicting signals between both parties, especially in the case of the near-term US$50bn agricultural purchases Trump wants China to make. China have in no way confirmed their commitment to ramping up purchases to US$50bn from what they currently do; a mere fraction at US$20bn. China are also reticent to make such commitments until Trump rolls back some existing tariffs. USDJPY trades at 108.4 having pulled back from last week’s test of 109.
Brexit jitters
Risk sentiment at the FX open has taken a slight hit following weekend Brexit developments that saw the widely anticipated Brexit vote delayed on what was a historic first Saturday for UK parliament in 37 years; both AUDUSD and NZDUSD have gapped 20-30pips lower at the open. UK Parliament instead passed the Letwin Amendment which meant they weren’t able to vote on the deal until it was more thoroughly scrutinised. Importantly, PM Johnson was forced to request an extension of the Oct-31 Brexit deadline from the EU; which he did, though, in a “childlike” manner as observed by some parliament members. The risk of an Oct-31 No-deal scenario is now effectively lessened for broader markets but so are the chances that Johnson’s Brexit deal passes the trial and tribulations of UK Parliament before Oct-31.
ASX lower at open
Look for ASX cash to edge lower at the open 12-14pts after Dec Futures had a minor slide in NY Friday. Dec Futures have fallen 120pts since mid-week and could find be in for further losses until 6,480 support. The last three months has seen the ASX trade in a wedge formation with potential for a more longer-term bearish break. The question remains, is the ASX on a new path lower? Elsewhere, close attention should be paid to Afterpay (APT.AX) and how it carries last week’s -20% tumble into the new session.
