US equities closed marginally lower on Friday’s trading following President Trump’s advocation to escalate trade tariff to US$500 billion on Chinese imports – a number that is close to China’s full-year exports to the US in 2017.

Dollar Index also retraced to the 94.0 area, largely due to President Trump’s unconventional comment on Fed policy, saying the fast rate hike and strong US dollar is harming US economy and putting US trade at a disadvantage.

If we recall what happened after he took office in January 2017, the US dollar has been heading south following Trump’s tweets against strong dollar.

Weaker US dollar led to relief rebound in gold, silver and crude oil. Technically, however, precious metals were still in a bearish trend with their SuperTrend (10,2) and 10-Day SMA both sloping downwards.

The ‘dropping like a rock’ offshore renminbi CNH rebounded to 6.77 area from its 12-month low of 6.82 seen last Friday. Chinese central bank was reported to encourage commercial banks to lend more to targeted SMEs and struggling entrepreneurs, bringing relief to those who got squeezed in government’s deleveraging campaign. There are, however, concerns surrounding whether fresh lendings will eventually go to property investment, which is forming a larger and larger bubble. 

China A 50 index, representing the performances of China’s largest financial companies, rebounded sharply on Friday. The breaking news on vaccine scandal over the weekend, however, is likely to dampen investors’ confidence today as parents are losing faith in the country’s healthcare system.

In Asia, Hang Seng Index is consolidating at just above 28,000 points against the headwind of trade threat and negative sentiment coming through China A-shares market. Breaking down the critical level of 28,000 will likely open room for additional downside momentum towards the next support level at the 27,300 area. Technically, strong bearish trending lines – SuperTrend (10. 2), 50-Day SMA – are weighing down the index.

Hong Kong 50 – Cash

By Margaret Yang in Singapore


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