safety caution

US equities pulled back on Monday as investor exerted caution on the possible resolution of US-China trade relationship.

S&P 500 index retraced to 2,791 points, and failed to breakout a key resistance level at 2,800. Momentum indicator MACD and RSI suggest the market is technically overbought and may face some consolidation in the days to come. This Friday’s non-farm payroll and a string of macroeconomic data – such as new home sales, ADP private payrolls, trade balance and housing starts – will help to paint a clearer picture of fundamental metrics.

Gold price fell for a sixth day to US$1,286 area due to less demand for safety and a rising dollar. World’s largest gold ETFs suffered net outflow since last week. Technically, gold can find its support levels at US$1,286 (100% Fibonacci Extension) and then US$1,274 (78.6% Fibonacci Extension). Trend has turned bearish, with both 10-Day SMA and SuperTrend (10,2) sloping downwards. Momentum indicator RSI has come down to an oversold territory of 30%.

Crude oil prices rebounded 1% overnight but overall trend is turning bearish, as suggested by 10-Day SMA, MACD and DMI indicators. Tomorrow’s DoE petroleum report will reveal the latest update of supply-demand relationship. Last week’s reading boosted crude price with an unexpected 8.64 million cut in US crude inventory. 

In the National People’s Congress meeting this week, China premier Li Keqiang revised the country’s 2019 GDP target down to a range of 6.0-6.5%, significantly lower than last year’s target of 6.5%. This allows policymakers more leeway to transform the country’s economy into one with higher quality, sustainability, and environmental friendliness. Simulative policy to address a slowing economy has been announced, including a three percent cut to the top bracket of value added tax that aims to foster the manufacturing sector, at the expense of higher budget deficit in 2019.

China’s annual political conference in Beijing this week is likely to back the strength of its currency and equity markets as policymakers tend to maintain a stable financial market during major conferences.

In Singapore market, DBS, OCBC, UOB, Keppel Corp and Venture led the gain in benchmark index on Monday, boosted by trade optimism that China and US may soon finalise a deal to tackle tariffs. Among blue chips, Venture Corp rallied 3.8% as its underlying business – electronics manufacturing – is most sensitive to global trades.

Technology stocks like Hi-P and Memtech also registered strong gain on Monday as they are likely to benefit most from the trade resolution. Technically, those shares have been oversold last year and embraced a strong rebound rally. 

A string of central bank meetings this week – RBA, BOC and ECB will paint a clearer picture of the economic development and monetary policy in major developed countries. US non-farm payroll this Friday will sharpen markets’ expectations for Fed’s monetary policy and diagnose the health of US jobs market.

Gold – Cash

 

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