South Korean GDP Beats Forecasts

Originally published by AxiTrader

An interesting day ahead for Asian traders as markets react to the sea of red across global stock markets, the mixed outlook for the US dollar, and particularly the increase in US bond rates which has some influential investors talking about a looming "moment of truth".

Wrapping up the overnight action stocks were lower as a combination of a Republican Party spat that could threaten Trump’s tax cuts, earnings news, and rising bond rates knocked stocks in the US lower. That saw the S&P 500 lose a reasonably hefty 13 points, 0.5%, to close at 2,556. The Dow Jones Industrial Average lost 0.5% as well to close at 23,339 while the Nasdaq 100 dipped 0.44%.

Stocks in Europe were also lower while Australian and New Zealand stock markets have opened down. It's a signal that Asia's stock markets too may be under pressure today.

Of particular note after a stellar run higher, and with the USD/JPY stalling, the Nikkei 225 looks a little vulnerable at present.

Chart

The technicals suggest prices are a little toppy and a beak back below yesterday's low would suggest a move to 21,216 - my fast moving average - but more likely signal a pullback toward the 38.2% retracement level of the up move at 20,843.

Likewise, the Hang Seng looks biased to trendline support at 27,430 if 28,00 gives way.

In many ways, it's all about bonds in global markets at present. I'm not suggesting a crash in stocks as bonds rise. But if this move higher in US - and other - rates is sustained inevitably questions of valuations will arise.

Global growth is a salve to major concerns, especially across the Asian region which will benefit strongly from this lift and synchronisation in developed world growth.

Just quickly on Asia forex.

It's worth noting the Singapore dollar is fighting back, so too the Philippine peso while the Korean won should benefit from that solid data this morning.

The key here is that the US dollar's fortune are mixed across global markets at the moment given that forex markets right now is that traders have assimilated the US economy, what the Fed will do, what a Trump tax cut may eventually add to growth, and are instead focusing on the other side of the pairs against the US dollar.

So data matters.

Data released from South Korea today was much stronger than expected.

South Korean Q3 GDP is out with a solid beat against consensus. Data showed that growth in Q3 rose 1.4% against the 1.0% rise expected. That took year on year growth to 3.6% against last quarter's 2.7% and the 3.2% expected.

Chart

It wasn't a universally strong number with private consumption up 0.7% against expectations of a 1% rise.

But, those of us who watch South Korea as a bellwether for global growth will see this data as further confirmation that the global economy does indeed face its best year of growth in a decade in 2108.

That's again positive for the region and for risk assets globally.

Looking at the USD/KRW specifically the uptrend since July is being challenged again at the moment. It was broken yesterday before the market closed above it once again. If USD/KRW trades down and through 1122 it coule be a signal for a deeper move.

And just quickly on China

It announced its new leadership team yesterday which suggested that president Xi is going to break from recent tradition and try for a third term in 2022. I say that because there is no clear successor among the members of his standing committee. And it was clear in his marathon speech to open the 19th National Congress that he has a long vision for China and is playing a long game. So it seems he may want to stick around a little longer to see that vision entrenched and executed.

What we'll all need to watch is what this means for reform and thus Chinese economic growth. Xi appears to have reestablished the primacy of the CCP over the markets in his first 5 years nad he reiterated that in last week's speech.

So it will be interesting to see how this manifests for growth and the Chinese economy in the quarters ahead.

On the data front today:

• Japanese bond and stock investment data by foreigners is out.
• Singaporean industrial production is expected to have dipped back to 10% year on year after August showed a solid 19.1% annual pace.
• Hong Kong Trade data for September

Have a great day's trading.