Things were not quite smooth over the weekend when it came to global politics. US equities retraced from record high following news that Beijing has turned down trade talks with Washington and has no intention to resume the talk before mid-term.

The 10% tariff on 200 billion Chinese goods is taking effect today, and the duty is likely to increase to 25% on 1st Jan 2019, three months from now. Rating agency Fitch has lowered China’s 2019 GDP forecast by 0.2 percent to 6.1 percent as trade war shows no sign of stopping any time soon.

At the same time, EU leaders have rejected Teresa May’s Brexit proposal in an informal EU summit due to dissent on trade and the Irish border issue. As a result, GBP/USD registered its biggest one-day drop in nearly a year to the 1.308 area. Immediate support level could be found at around 1.300 area (61.8% Fibonacci Extension), but the currency pair is vulnerable to political shifts surrounding Brexit talks despite recent macro data showing resilience in the underlying economy.

Negative sentiment is likely to impact Asian markets this morning, although major Asian markets including China, Japan, Korea and Taiwan are closed on Monday for the Mid-Autumn festival. Hong Kong is open today and will be closed tomorrow.

Singapore market opened flat this morning, holding above a key level at 3,200 points. The Straits Times Index soared 34 points on Friday with surging trading volume, suggesting strong capital inflow as buyers are back to the market hunting for bargains. Do watch out the 50-Day SMA (3,233) for possible pullback, as 50-Day SMA is a technical resistance level.

Hang Seng Index is facing selling pressure at around 27,800 area, where both SuperTrend (10,3) and 50-Day SMA are holding down the trend. Failing to breakout this level will likely to result in a technical pullback towards the 27,000 area.

Hong Kong 50 - Cash

By Margaret Yang in Singapore

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