Asian equity markets are set to open on the front foot as Alphabet reported strong earnings after the US close today, this despite a hefty fine for the European regulators. It had been a bit of a mixed day for financial markets as investors try to work out the best way of negotiating what has been a relatively strong earnings reporting season against the threat of a global slow down as US tariffs take effect. The dollar appreciated as US 10-year treasuries once again moved towards the 3% level, trading as high as 2.96%, the highest level for a month.
President Trumps twitter account was once again a strong focus for traders as he attacked Iran with strong language, threatening dire consequences if they were to take on the US. This sort of rhetoric from any other President would have seen turmoil in the markets, but there was little initial reaction as markets saw a striking similarity to the tactics used when dealing with North Korea in the not too distant past. Only time will tell if this approach works well with Iran and indeed if it succeeds in curbing North Korean nuclear ambitions in the longer term.
Investors fear that a Currency war could be in the offing in tandem with a Trade war as the President also took issue with the recent sharp decline in the Chinese yuan. Contrary to the presidents wishes, the yuan continued its decline again during yesterday’s trading and having seen a 6% drop in the last month sits now just above recent lows against the dollar near 6.8000. This currency contagion could continue to spread to other emerging Asian currencies as well as the Aussie, Kiwi and Yen in the majors and currency traders will continue to monitor the levels closely.
Looking ahead to today’s sessions and it looks like the market is set for more of the same, with little in the way of fundamental economic data due to be released we are once again set to monitor the news wires and more specifically a certain twitter account. Investors hoping for a return to more fundamentally based trading conditions over the traditional northern hemisphere summer lull look set to be disappointed as markets remain wary of changes of sentiment and many products sit close to vulnerable levels.