European shares slumped overnight after Asia Pacific equities fell yesterday. Market sentiment was relatively weaker against the backdrop of the ongoing Brexit issues whilst US markets were closed in honour of the former US President George H.W. Bush’s state funeral. Gold prices and the Japanese Yen slid, two factors that signal investor behaviour might be cautious although risk appetite might remain in positive territory. Investor confidence could be higher today after an official response on the US-China trade negotiations was released yesterday. A spokesperson for the China Ministry of Commerce mentioned that the meeting in G-20 was “very successful” and that both sides will actively push forward “clear schedule and roadmap”. Futures market are pointing to slight opening gains for the Japanese, Hong Kong and Australian stock markets while Shanghai could face pressure. A positive finish for regional shares is possible if trade optimism softens investor selling.
The US dollar was marginally higher overnight and most G-10 currencies were flat. The Euro and the Pound were little changed despite a higher than expected EU PMI. In contrast, the Australian dollar weakened sharply on lower than expected GDP growth at 2.8% year on year. The nation’s Retail Sales and Trade balance data due this morning could put further pressure on the higher level of the Australian dollar, if market expectations are missed.
On the other hand, investors and traders may face higher movement in the US dollar as the economic calendar is US data heavy over the next 24 hours. The US ADP National Employment Report, the ISM Non-Manufacturing data, Unemployment Claims, Trade Balance, Factory Orders, and PMI due late tonight are all potential catalysts. Analysts will focus on growth factors that could help to understand the pace of future rate lifting by the Fed. Further, the US Department of Energy Crude Oil Inventory report due after midnight could mean pressure on the recent bounce in oil prices if a build in stockpiles is confirmed.