Asia Markets
Asia shares are trading lower this morning led my losses on the Nikkei which is down 1.4 % ahead of a supplementary budget but the usual themes are weighing on local sentiment. Concerns over China -U.S. trade tensions, a possible slowdown in the Chinese economy and higher U.S. interest rates continue to sour market views as domestic investors are better sellers than buyers of risk, despite US market showing signs of stabilizing on Friday. Indeed the fear around US tariff increases due to take effect in January 2019 is factoring. And when compounded by the Bank of Communications suggesting China home prices are likely to fall in the next two quarters will indeed weigh on China markets. Indeed echoes of October pasts are reverberating across global capital markets.
Oil Markets update
After the initial spike higher on Saudis threat to hit back again any sanctions news, markets are settling in as the duelling narratives unfold. The lack of a current fundamental supply deficit in oil markets as supported by International Energy Agency monthly Oil Market Report indicating global demand is lower and terming supplies “adequate for now” Versus the spare production capacity argument especially if the market underestimates the supply crunch from Iran sanctions and Venezuela production. But let’s face it, we are little more than on supply disruption for prices shooting higher over the near term with traders now eyeing Libya after the NOC warned of a possible closure of Zawiya refinery if security is not shored up. The markets continue to trade gingerly with a positive bias as the Saudi narrative unfolds with Saudi suggesting $200 per barrel Oil not out of the question.
Gold Markets
Gold remains supported by escalating Geopolitical tensions as smouldering embers in the Middle East are yet set to ignite again on the latest Saudi developments. Adding the mix is the though may consider pausing their widely expected rate hike in December if global equity markets continue to falter. But an abrupt shift in Fed policy will likely lead to a lack of confidence in the worlds most important central bank and could destabilize markets further.
CNH
Focus back in the CNH has Pboc suggests there is plenty of room for monetary policy adjustment amid trade war. But tempered rhetoric by suggesting the currency was near fair value.
They Yuan is fixed firmer than expected, however, and the market is not taking USD/CNH higher.
Malaysia
China has agreed to purchase 500K tons of palm oil, which should support those local constituents on the Bursa Malaysia. No currency reaction to this news so far.
Brexit
So much for the defining moment in the Brexit negotiations after a tense standoff overnight, PM May sent Brexit Secretary Dominic Raab to Brussels, who then hightailed it home after only 1 hour after meeting with Barnier. The Pound has traded lower but finding tentative support around 1.31 as the Brexit roller coaster continues.
German Politics
Perhaps flying under the radar Angela Merkel’s sister party has suffered massive losses in Bavaria’s state elections, exit polls suggest, in a blow to the German chancellor. The Euro hasn’t reacted to much to this news as I suspect dealers have bigger fish to fry as Italy’s budget is set to be offered up to the EU committee.