Summary: Equity markets saw mixed outcome on Friday with US indices and equities closing in red as concerns over China & U.S.A trade relationship weighed down the market significantly. US Wall Street was further weighed down by Payroll and wages data outcome which was worse than expected and put a dent in investor confidence. Analysts and Investors were already worries as US treasury yield inversion curve was viewed as sign of economic recession in U.S.A. This was followed by news of possibility of US Fed putting a pause on rate hike after December 2018 which impacted price action of US Greenback in broad market.
Weaker US macro data has led investors to believe that 2019 rate hikes by Fed may not go according to plan and further headlines from weekend and macro data updates that hinted at slowdown in economic growth in major markets like Japan, Euro zone and China inspired a dovish investor tone causing equity markets to trade in red as trading session opened for the week. Negative outlook from US macro data caused Wall Street indices to lose more than 2% in spot market on Friday and US futures trading in Asian markets continue to trade in red hinting at possibility of bearish price action in US stock market tonight.
- The US Dollar index (USD/DXY) which measures the strength of dollar against six major global currencies is at $96.57 down by 0.07% in early European market hours signaling subdued demand for USD across major global markets.
- Major indices in key Asian and European markets are trading in red since trading session opened for the day with all major Asian indices losing over 1% as worries of slowdown in economic growth and business activity dealt a serious blow to investor’s risk appetite.
- Crude Oil price recovered significantly on Friday after OPEC + summit managed to delivered a better than expected output cut with OPEC member nations agreeing to reduce output by 800000 barrels per day while non-OPEC members agreed to cut output by 400000 barrels per day which combined with news of pumps being shutdown in Libya’s largest oil field helped oil market recover early 6% ahead of European market hours.
- While US President Trump has commented that arrest of Chief Officer of Chinese telecommunication giant Huawei won’t affect trade negotiations, investors remain cautious owing to China demanding release of arrested executive and no solid details on trade negotiations have been released so far.
On The Lookout:
- Brexit – While UK’s Prime Minister Theresa May has refused to take EU’s helping hand or delay parliamentary vote on Brexit deal scheduled tomorrow, headlines indicate that several ministers and key officials in May’s government are ready to pull the plug on Parliamentary vote which could happen around mid-night on Monday or early hours of Tuesday as rejected deal could immediately follow dissolution of PM May’s government and head into messy no-deal Brexit scenario.
- France Protest – While yellow vest protest initiated to show citizens dissent towards government’s decision to hike tax rates and the same was later withdrawn, the protest continue to escalate leading to destruction of public property and infrastructure worth millions resulting in Bank of France slashing its fourth quarter growth forecast by half. Amid loud calls to end the “yellow vest” crisis, President Emmanuel Macron is expected to address the nation at 19:00 GMT.
- Chinese Renminbi – Chinese equities close for the day with over 1% decrease in value while China’s Renminbi traded on a poor footing, on track for its worst day in two months, after official inflation and export data disappointed which clearly signals that Sino-U.S. trade war is taking a toll on economic growth of China.
- Economic Data Release & Events – UK’ market will see release of Q3 GDP data, Manufacturing production and trade balance data while, US market will see release of JOLTs Job Openings data. Canadian market will see release of Housing Starts & Building Permits data.
Trading Perspective:
- AUD/USD -Australian Dollar opened bearish for the week moving down to three week low at 0.7178 after closing in red for 5 consecutive trading days against US Greenback. However broad based weakness surrounding USD helped the major recover nearly 40 pips from 3-week lows. The pair now trades in range bound fashion as ongoing US-China trade spat limits upside move of the major.
- USD/JPY – The USD/JPY pair started the week on the defensive but managed to find some support near 100-day SMA support once again and has recovered around 20-pips from session lows as demand for USD is subdued in broad market following disappointing US macro data. The upside for Japanese Yen is limited as recent macro data pointed to slowdown in economic growth of all major Asian markets which included Japan.
- EUR/USD – EUR/USD is trading higher despite a risk-off atmosphere and the major kicked off today’s trading session in upward price action well above 1.1400 handle as the benchmark 10-year U.S. Treasury yield is on the back foot, down to 2.85% which combined with prospect of US Fed pausing their rate hike plans and disappointing macro data has resulted in USD turning dovish across the board.
