Biggest discussions around the market this morning
The upcoming FOMC meeting and China’s policy-setting meeting, has been the most actively discussed topics around the markets this morning. And both events have a smoothing effect on risk sentiment. Chinese President Xi Jinping’s keynote speech at the celebration of the 40th anniversary of China’s reform and opening. The address will start at 10:00 Tuesday morning local time (2:00 GMT). A
We should expect a raft of stimulus measures from China policymakers in an attempt to stabilise the domestic economy.
On the Fed front, the market is banking on a dovish hike which should be kind enough to stabilise equity risk sentiment into year end
Also, everyone is trying to figure out where the dollar drifts in early 2019. Of course, a more dovish Fed gives rise to expectations of a lower USD in 2019 which could provide a small help to Asia and global EM markets regarding FX.
However, a broader slowdown in growth remains the primary concern and I suspect Global growth signals will probably stay dampened through Q1 2019 but as the Pboc unleashes its stimulus war chest to the right the economic ship, there could be a turn around in growth sentiment sooner than expected.
Overall Asia markets are trading mixed with few if any clear signals to drive the bus
The Euro
The Euro is finding support above 1.1300 this morning as better news is filtering through from Italy despite fears of a slowdown in the Eurozone region for 2019 likely to persist. Bloomberg reports, “Italy has identified about EUR3bn of additional funds that could cover a budget deficit of 2.04% of output, a government official said. It is believed that the European Commission had asked the government to come up with an additional EUR3.5bn of reduction in the deficit, last week”. This headline should trigger some bearish bets to unwind. And while it doesn’t trigger a buy EUR signal is does suggest less reason to sell the EURUSD today.
But as you can see no one is precisely knocking the door down to buy Euro’s with last weeks dismal PMI’s fresh in trader minds.
Oil markets update
Oil is finding support at WTI 51 as the drop in Baker Hughes rig counts points to a near-term slowdown in US production and when combined with Saudi Arabia is expected to cut export to the US to draw down inventory builds it should provide a short-term base despite global slow down fears continue to resonate.
Also, we could see a knee-jerk reaction higher in oil prices and commodities in general if the China Central Economic is working conference signal more aggressive policy stimulus, so some short covering is unfolding in hopes to re-engage bearish bets on a possible knee-jerk higher.
Singapore
In yet another casualty of tariff wars, Singapore NDOX disappoints Singapore November non-oil domestic exports MoM have come at -4.2% versus 2.3% expected. The YoY number is -2.6% versus 1.8% expected
