8/8 – Risk appetite improving
The US stock market rose as the US and China ceased new tariffs, for now. Global bond yields are higher with gold prices holding at eighteen months lows, suggesting an improvement in risk appetite. The US dollar broadly weakened against its peers as US consumer credit grew slower than expected. A weaker US dollar and positive momentum from the US close may spill into the Asia Pacific trading session today.
Yuan strengthens as PBoC imposes new policy
The offshore Chinese Yuan recovered lost ground as the US dollar softened. The Chinese foreign currency reserve increased as the People’s Bank of China (PBoC) imposed a higher reserve ratio on FX forward contracts yesterday. The Chinese Trade Balance due today may show a retreat, with the consensus forecast at 10% growth. A lower number may be a reflection of adverse impact from the trade war, possibly limiting gains in its respective centres.
Chinese Crude oil future reached 5% daily cap
Chinese crude oil futures rallied to an all-time high, reaching their 5% daily gain limit. This could be a sign of concerns about output uncertainty from Saudi Arabia, and YS sanctions on Iran. The weekly US crude oil inventory report due tonight may determine the direction of markets over the next 24 hours.
Futures are pointing to a positive start for Asia Pacific share markets. Growth and higher value stocks may gain better support if risk appetites increase. However, the Chinese Trade Balance and the Australian Housing Finance number may moderate today’s action. In Australia, the financial sector may see a larger correction as AMP announced a drop in underlying profit, and the Commonwealth Bank reported lower actual Earnings Per Share.