China’s Caixin Services PMI rose to 52.1 this morning, dragging most Asian stock markets higher, following a poor Wall Street performance and weak data from other parts of Asia-Pacific today.
Following weak U.S. manufacturing data overnight, hinting that America is finally feeling the effects of the trade dispute with China, Singapore and Hong Kong both posted weak PMI’s. In Hong Kong’s case, the PMI fell to a ten-year low of 40.8 as the political troubles weighed on private company activity.
The glum mood did not lift as Australia’s sank to 1.40% YoY continuing a run of sub-optimal data from the land down under. Household spending remained steady with most of the growth arising from primary exports providing one bright spot.
Eurozone and German Services PMI’s at 1555 SGT will be the data highlights in Europe today as the market tunes into the British Parliament to see if a U.K. snap election becomes a reality. With so many possible permutations of outcomes possible, it is hard to make even an educated guess as to what the day will bring in Westminster.
Equities
Equity markets have diverged in Asia with the Nikkei 225 flat on the day while the Australian ASX 200 is lower by 0.60%. China’s positive data has lifted regional markets higher. The Shanghai Comp up 0.22%, China CSI 300 up 0.16%, the Hang Seng up 1.10%, and both Singapore and South Korea slightly in the green, reversing earlier losses following the Wall Street session.
Whether Europe has such a benign outlook remains to be seen though. The FTSE will be a wildcard as we await the outcomes of today’s Parliamentary session.
Currencies
After the wild swings and impressive recovery overnight, the GBP remains steady at 1.2105. Markets have a clear bullish bias toward GBP on potential soft-Brexit news. Thus, any such outcome from Westminster today could give more ammunition to a GBP short-squeeze in a structurally short market. Conversely, if Parliament agrees to a snap election this evening, sterling’s outlook becomes much more muddied.
The AUD continues to outperform today, following an impressive performance after the RBA held rates steady yesterday. It has risen 0.27% to 0.6775 this morning, possibly buoyed by an improved export performance by the mining component in today’s otherwise uninspiring GDP data.
Elsewhere, regional currencies continue to tread water against the U.S. dollar with USD/CNY steady at 7.1700 and the USD/SGD unchanged at 1.3897.
Oil
After WTI’s two per cent overnight fall post the U.S. manufacturing data, Asia has seen some profit-taking buying in both crude contracts. Brent crude has risen 0.14% to $55.45 a barrel, and WTI has risen 0.35% to 54.25 a barrel.
Both contracts remain vulnerable to further weak data from the U.S. this evening.
Gold
After another strong performance overnight on haven buying, gold saw profit-taking this morning. It has fallen 0.22% to $1545.00 an ounce. Despite the length of the bull run by gold and silver, as long as so much economic and political uncertainty hangs over markets, their safe-haven status will ensure plenty of risk hedging buyers will appear on dips.
Gold has strong technical support at $1520.00 an ounce with resistance initially at $1560.00 an ounce.
