Sentiment improved across the board and US markets had a decent rebound overnight, led by technology (+1.6%), energy (+1.09%) and industrials (+1.07%), although utilities (-0.87%) fell.

However in early Asian trading hours, it seems ‘risk off’ sentiment prevailed as the US-China trade spat showed no sign of de-escalating and safe-havens edged up higher, while equity futures are positioned to open lower across the region.

Today, a string of economic data will shift market focus to the fundamentals. China will release urban investment, industrial production and retail sales data at 10am Singapore time, which will be important to set the tone for Asian market trading this morning. China retail sales growth rebounded slightly to 8.7% last month, which showed a silver-lining for Asia’s largest consumer market against the backdrop of tax cuts and fiscal spending. Boosting domestic consumption is crucial for China to withstand the impact of slower exports when trade tariffs hurt.

For AUD traders, Australian wage growth data (released at 9.30am Singapore time) will be a key focus too. Later today, Germany and eurozone GDP readings will set the tone for EUR/USD. The growth of Germany and the EU economy is expected to rebound to 0.4% in the first quarter. 

The stabilisation of the Chinese yuan against the greenback helped to calm the market yesterday. The offshore yuan has fallen over 2.5% in the last six trading days, registering one of its sharpest depreciation since trade disputes with the US started mid last year. The USD/CNH is trading at around 6.914 this morning, a five-month high. Reading from the chart it seems that there is room to go up further. 7.00 is widely believed to be a psychological support level for offshore yuan that the China government will try to defend. 

Singapore’s Straits Times Index (STI) has found some support at psychological level of 3,200. The STI opened flat this morning, with financials, technology and offshore & marine sectors outperforming. Despite improving sentiment, investors are likely to remain cautious due to the uncertainties surrounding the US-China trade talks.

The Hang Seng Index has rebounded near a key support level at 28,000 points. Yuan stabilization will cushion the selloff in the HK stock market, whereas a resurging in its depreciation will kick off a negative feedback loop formed by weaker yuan outlook – capital outflow – stock selloff – weaker yuan.

Hong Kong 50 - Cash chart


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