Asian stock markets are positioned to open mostly higher, underpinned by higher-than-expected 3Q US GDP advanced readings that helped to dampen fear over trade uncertainties and thus lift sentiments.

US economy grew at an annualised pace of 3.5% last quarter, comparing to economists earlier forecast of 3.3% compiled by Reuters. The growth was largely driven by strong rise in consumer spending, inventory build-up and government spending. A key measure of inflation increased by 1.6 percent in 3Q, a significant shortfall from market expectation of 2.2%. These readings alleviated concerns over slower growth and higher inflation.

US index futures climbed higher this morning, erasing part of last Friday’s losses as volatility settled down a bit. Dow Jones has come down to 24,590 area - its 78.6% Fibonacci Retracement level, and tested this support for a few attempts. Coincidently, 24,590 is also a 61.8% Fibonacci Extension level in a shorter horizon. Holding above this key level could potentially lead to a rebound, whereas breaking down would likely pave way for further downside towards the next supports at 24,250 and 24,000 respectively.

In Singapore, the Monetary Authority of Singapore has addressed ‘lower but still firm’ growth for the rest of 2018 in its latest biannual macroeconomic review last Friday. MAS reiterated its expectations for full-year growth to come in within the upper range of 2.5-3.5%, and trade frictions between US and China has yet to cause significant impact on growth. However uncertainty remains for the outlook of next year, especially after the 25% tariffs kick in on Jan 2019 for almost 40% of all Chinese exports to America. Trade-related services, such as wholesales trade, transportation and storage would likely get impacted in particular.  

In Singapore, the Straits Times Index dropped below 3,000 points for the first time since Jan 2017. Even an upbeat UOB earnings failed to lift market sentiments last Friday, suggesting the sell-off is mainly caused by foreign reasons. Technically, 3,000 remains to be a near term support. Breaking down below would pave the way for further losses towards the 2,950 and 2,800 area. Fundamentally, the valuation of blue chips are not expensive now in terms of trailing price to earnings.

US 30 - Cash

By Margaret Yang in Singapore

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