US equity indices hovered at record highs on Wednesday, as market bulls chose to take a break after a decent rally seen last week following the signing of the US-China phase-one trade deal and the UK elections.
On the macro side, the global economic outlook seems to have improved in November and is going to extend a positive trajectory into early 2020. The global manufacturing PMI composite swung to the expansion territory and reached a 7-month high in November, showing tentative signs of recovery. Latest China industrial output and retail sales were also upbeat and the outlook is set to improve due to the temporary ceasefire and partial tariffs rollback with the US.
Last night, US Housing Starts and Industrial Production figures both beat market expectation, leading to a rebound in the US dollar index. US Housing Starts increased by an annualised rate of 1.36 million last month, hitting a multi-year high. It measures the strength of the US construction sector and housing market and thus is also a good indicator for the US economy as a whole.
US Industrial production expanded 1.1% year-on-year, faster than consensus forecast of 0.8%. Industrial production measures the inflation-adjusted value of the output produced by mines, utilities and manufactures and thus is a leading indicator of economic health.
Positive economic data could pave way for more upside in risk assets, particularly emerging market assets.
Hong Kong (HK) equity market is the best-performing in Asia and perhaps also across the globe. The Hang Seng Index registered an astonishing gain of 5.32% over the last 5 trading days, surging to 27,800 points. Technically, the Hang Seng Index is challenging a key resistance level at around 28,000, which it almost reached in early November. Breaking out above 28,000 will open room for more upsides towards 28,600 points (100% Fibonacci Extension).
USD/HKD currency pair have declined substantially, in relative terms, over the past five days too. This signals that capital is coming back for ‘bargain hunting’ in HK dollar denominated assets. HKD is pegged with the USD within a tight range of 7.750 – 7.850, and it is a relatively good indicator of capital flow into and out from HK, Asia’s most dynamic financial hub.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.
Margaret Yang Yan