Asian markets opened the week on a slightly upbeat note following a positive close in the US on Friday. Stocks in Sydney (+0.14%) and Tokyo (+0.05%) were flat, and the Hang Seng (+1.84%) led gains as investors swapped their US-listed Alibaba (NYSE:BABA) shares for the Hong Kong shares to avoid any de-listing of major Chinese tech companies as a result of escalating US-China tensions. Alibaba shares were up 3.56% in Hong Kong. It is expected that the outflow in US-listed Chinese stocks continue and drain liquidity in the US-listed stocks, as many Chinese tech firms are now going after a dual US-HK listing to reduce their risks of being kicked out of America. The outflow of Chinese-tech liquidity shouldn’t have a large impact on the overall US stock markets, remarkable though it is. On the other hand, knowing there are other options to stay invested in valuable Chinese holdings despite the trade war is certainly a relief for global investors.
US futures edged higher, and activity in FTSE (+0.38%) and Euro Stoxx (+0.52%) futures hint at a positive start in Europe on Monday.
The US dollar was flat near the 93 mark in Asia, as the 10-year treasury yield slid below 0.63%.
On the data front, retail sales in New Zealand fell 14.2% in the second quarter as the Covid lockdown took a toll on economic activity. The figure was better than expected by analysts.
The week starts with an almost empty economic calendar, but important economic events will keep the markets busy later this week.
Investors are focused on the German and US GDP data (on Tuesday and Thursday respectively), and Jackson Hole symposium on Thursday, where the Federal Reserve (Fed) Chair Jerome Powell will speak about the latest view over the US economy and the monetary policy. Released last week, the Fed minutes disappointed the doves as the US policymakers refrained from giving more policy guidance as the US economy remained in a difficult position due to persistently rising Covid cases. Powell will likely reiterate the Fed’s support to the economy without however hinting at new policy tools or measures in the foreseeable future.
The EURUSD kicked off the week on a slightly bearish note. The steady US dollar sent the pair below the 1.18 mark in Asia. The story remains the same: the pair has become a puppet, the direction is uniquely driven by the US dollar appetite, and the overstretched EURUSD pricing continues hinting that there is a greater potential for a meaningful downside correction rather than a further positive push.
Cable is back below the 1.31 mark after last week’s failure to combat offers above the 1.32 mark. While the sell-off in the US dollar keeps the pair above the 1.30 handle, sterling has little merit at the current levels, as the currency bears the brunt of the Brexit uncertainty on top of its economy shattered by the pandemic.
Gold traded a touch lower near the $1930 per oz. Soft US yields and solid inflation expectations should continue giving support to the yellow metal at the dips.
WTI crude shows toppish signs near the $42 per barrel, and the hesitation to buy at the current levels could bring the tactical bears in for a deeper downside correction towards the $40 handle.
Speaking of oil, news that Turkey found oil in the Black Sea causes two-side volatility in the Turkish lira as investors try to put a price tag on the extent of the positive impacts that the latter could have on the country’s balance sheet. Turkey is a net oil importer and domestic oil will certainly help reducing the energy bill meaningfully. But uncertainties regarding how and when the oil could be exploited, and eventually exported, keep short-term buyers on the backfoot and the short-term lira appetite limited. The USDTRY remains on track for further gains, as traders target the 7.50 as the next bullish milestone.