US equity markets came off from record highs for a fourth day amid escalating trade tensions and emerging market turmoil. Mixed macroeconomic data last night gave traders more reason to take profit from technology shares and stay off the bar.

The S&P 500 index has entered into technical correction, with its immediate support and resistance level found at 2,850 (138% Fibonacci Extension) and 2,900 area respectively. The 10 Day-SMA has flipped downward, signalling a bearish trend is likely to form.

The German Industrial orders surprisingly fell 0.9% last month, missing consensus of a 1.8% rise. US ADP private payrolls came in at 163k - its lowest reading in a year, missing forecast of 190k. US factory orders and weekly unemployment claim also came below market expectations.

Tonight’s US non-farm payrollsis in the spotlight again, and it is likely to paint a clearer picture of the Federal Reserve’s rate-hike outlook. The forecast for is 191,000 jobs to be added. Risk-adverse investors may choose to stay away from market during non-farms period to avoid surging volatility. Whether the reading is good or bad, it is difficult to alleviate the sell-off in emerging markets, because a strong jobs reading is likely to strengthen the USD, whereas lower readings will dampen market confidence. Therefore, there is no easy way for investors to choose a side now.

The ongoing NAFTA trade talk between US and Canada, on top of the threat of new tariffs on US$200 billion Chinese goods continued to weigh on market sentiments. Studies show that the impact of US$200 billion tariffs on China would potentially affect US households more than the impact on the China counterparts, as many of the Chinese imports – electronics, furniture, toys, sport equipment, apparel and footwear – go directly into US consumer market. On the other hand, the US goods imported by China mainly goes into industrial and corporates. They are mainly in Aircraft and parts, soybeans, cars, semiconductors and industrial machinery. Therefore, US consumers will start to feel the pain as soon as President Trump tries to make life more difficult for his eastern counterpart with tariffs.

In light of escalating trade frictions due to widening US trade deficit in the month of July, Asian equity markets reacted negatively as bearish sentiments dominate the risk assets. Singapore investors’ confidence was likely affected too, despite robust Manufacturing PMI showing resilience in the underlying economy. The STI has broken down below a key support level at 3,200 points and the next support can be found at around 3,080 area.

US SPX 500 - Cash

Market calendar - non-farm payrolls

By Margaret Yang in Singapore

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. CMC Markets is regulated by the Monetary Authority of Singapore.