Technology shares led the sharp decline in US equities after the markets resumed trading on Tuesday, as uncertainties surrounding the upcoming US-China trade negotiation weighed on sentiment.
The White House has declined China’s request for a ‘preparatory talk’ before the high-level meeting scheduled at the end of January, signalling the two countries faced tremendous difficulties to reach a common ground on structural reform and forced technology transfer issues.
Macro fundamental does not look great. The US existing home sales number of 4.99 million fell short of earlier expectation of 5.25 million and the market continued to cool off. It has also registered the lowest reading in three years, suggesting a further loss of momentum in the housing market.
This morning, Japan trade balance data has painted a pessimistic picture on global trades as external demand is slowing and trade war between the US and China is imposing spill-over effect into other economies. Both export and import have fallen short of market expectations, with exports dived further into contraction territory. Japan’s exports fell 3.8% YoY in December, largely due to a 7% decline in shipments to China and Asian markets.
The volatility index spiked to 20 from 18 a day before, and global equities indices have all pulled back from their multi-week highs with cautious sentiment dominating traders’ minds. A weaker global economic outlook pointed out by IMF in the Davos forum led Crude oil prices to slump over 2% overnight. Meanwhile, investors are trying to price in a slower pace of business investment and consumer spending from China, as the country’s economy has reached decade-low and yet to see a clear bottom.
Asian markets are likely to suffer from negative sentiment across the globe, with geopolitical uncertainties and tepid economic outlook back to the centre stage this week. In Singapore, the Straits Times Index failed to breakout above a key resistance level at 3,225 area and entered consolidation phase. Investors are also eyeing blue chip’s earnings report starting this Friday onwards.
US SPX 500 - Cash chart
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