Originally published by CMC Markets
Global equities were mixed yesterday. In the Asia trading session, the Shanghai stock markets closed sharply lower but the Australian stocks rallied. Overnight, major US stock indices ended lower after an early surge but most Europe and UK stocks rose. The stock sell-off in both US and China appeared isolated. On one hand, the decline in US stocks could be a result of disappointing earnings amongst tech companies, and the plummet in China could be triggered by the worry of a slower economic growth. On the other hand, the weaker investor sentiment in both the US and China could be reflecting investors’ concerns about an elevation on the existing US-China trade war. Nevertheless, safe haven assets such as gold and the Japanese yen slid overnight, suggested risk appetite might be higher. Investor confidence could bounce if the negative sentiment is contained and geopolitical headlines continue to subside.
The US dollar rallied overnight, putting pressure on most major currencies. The offshore Chinese yuan edged lower with USD/CNH poked through 6.9700. The British pound slid, despite the UK economic growth forecast for 2019 have been upgraded by the UK Offices for Budget Responsibility. The euro fell after the German chancellor Angela Merkel announced a plan to step down and not to run for a fifth term. A series of macro data due tonight could spark higher volatility in the currency market. This includes the German unemployment data and the inflation reading, the EU GDP and the Consumer Confidence Index. Furthermore, the US Consumer Confidence Index due later tonight is forecasted at 136. The US dollar may exert a higher pressure on the G-10 currencies if the result meets market expectations.
Futures markets are pointing to a rough start for Asia Pacific equities. In particular the Shanghai and Hong Kong markets could remain under pressure. Nonetheless, some of the country’s largest corporations are issuing earnings reports today, such as ICBC (SS:601398), Agricultural Bank (HK:1288) and PetroChina (SS:601857). Investor buying could be lifted if a sustainable growth prospect or less impact from a slower economy is shown.
In Australia, the building approval data due this morning is forecast to be 3%. The banking sector could find further support to shake off recent weakness if growth is confirmed and market expectations are met.