China Aug manufacturing PMI came at 51.3, smashing market consensus of 51.0.

Higher-than-expected readings showed resilience in the economy against the backdrop of rising trade frictions between Beijing and Washington. A breakdown of the date suggests that strength came from production, which underpinned weakness in demand and export orders.

Meanwhile, a fresh round of potential US tariffs on $200 billion worth of Chinese goods continued to weigh on stock market, adding concerns of growth risk over an economy that already see signs of slowdown in exports.

US equities ranged bound last Friday as the trade talk with Canada end with little progression and will be renegotiated on this Wednesday. Dollar strengthened against its major peers, ending a four-day correction. Strong dollar weighed on metals and emerging market currencies, accelerating the outflow from smaller, troubled economies. 

US dollar has exhibited strong negative correlation with Asian stock market this year, as trade tension and Fed tightening strengthened the outlook of USD and led to EM outflow. While the US equity benchmarks are soaring to record high, the rest of the world are struggling to catch up with its momentum. Clear divergence was seen between the performance of US equities and Asian equities over the last six months, adding pain to investors who already suffered from currency depreciation.

Today, a series of manufacturing PMIs for European countries that is due to release later today will be in focus too, while the US market will be closed for a holiday.

Singapore market opened mildly lower this morning at around 3,210 points. Lacking of positive catalyst, the Straits Times Index is likely to range at around 3,200-3,350 points in the near term. With the prospect of rising trade conflicts between US and China potentially hurting the regional economy, sentiments remain fragile. If STI breakdown key support level of 3,200 points, it could lead to further downside towards the next major support at around 3,077 area.

Market Calendar

By Margaret Yang in Singapore

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