Asia stocks rose ahead of U.S. employment data and Fed Chairman Jerome Powell’s speech later this evening. Gold continued its overnight collapse as investors reduced haven positioning en masse after renewed U.S.-China trade talks.
Equities
The announcement that both the U.S. and China would return to the negotiating table in October has seen a U-turn in the previously negative sentiment hanging over equity markets. The rally that was sparked yesterday in Asia has continued today, albeit in a more subdued manner.
Asian stock markets have recorded a good day though, ignoring the just released surprise fall in German manufacturing. The Shanghai Composite and Shanghai Shenzhen CSI 300 have risen 0.45%, the Nikkei 225 0.40%, and the Hang Seng 0.47%. Earlier today the New Zealand NZX 50 hit record highs and the S&P/ASX 200 finished 0.47% higher. Regional markets across Asia have all recorded positive days.
Early European trading indicates a positive start with the German DAX 0.25% higher and the France CAC 40 0.10% higher. The UK FTSE 100 is slightly lower by 0.10%, weighed down by the possibility of an imminent general election.
Heading into the crucial U.S. Nonfarm Payrolls data (158k exp), we expect the positive tone to continue, albeit at a gentler pace from yesterday. Only a massively lower NFP print would likely derail the rally into the weekend.
FX
Region currencies have rallied against the U.S. dollaras investors continued to rotate in more positive growth trade positioning from defensive positioning in dollars, Swiss francs and Japanese yen. The NZD/USD was 0.40% higher at 0.6400. USD/CNH dropped 0.25% to 7.1200, and the USD/INR Futures fell 0.40% to 71.60.
Barring any unforeseen headlines or a U.S. data surprise, we would expect the upbeat tone to continue into the week’s end.
Gold
The gold collapse overnight continued at a gentler pace in Asia, with gold falling 0.55% or 9 dollars to $1512.50 an ounce, trading as low as $1505.50 during the session. Given the strength of the safe-haven driven rally of the last few months, it is no surprise that when the dam broke, there was a mass rush to the exit. Rising government bond yields also have undermind gold’s positive fundamentals.
Gold has initial support at $1505.50, the overnight and session low and now a double bottom. It is followed by psychological support at $1500.00 an ounce and then the critical long-term technical support at $1480.00. Resistance is at $1520.00, followed by $1534.00 an ounce.