Only a late rally in tech stocks in the US helped global markets pull back from a full risk off trading day. Stock indices in Asia and Europe all closed well in the red with many of the bourses finishing over 3% down. Risk trades were hit across the board with safe haven trades dominating flow across the currencies, US 10 year yields continued to suffer, dropping as low as 2.82% before recovering later in the day. Oil once again came under pressure as the OPEC meeting in Vienna ended without a press conference signalling that a deal to reduce production may not be on the cards today when other Oil producers join the meeting. The trading day had started on a nervous footing with US futures taking an unexplained crash early in the Asian day which put the markets on alert and events started to snowball from there. News that the Huawei’s CFO had been arrested and will be extradited to the US to face charges of violating sanctions against Iran added to market fears that the US and China will struggle to put a trade agreement together.
Geo-Political issues continue to weigh on markets as we move towards the new year and price action shows that investors are concerned that global growth will continue to slow as we move into 2019. Sentiment looks set to continue to dominate market direction and a ‘sell the rally’ mentality seems fixed in trades minds while we still await resolutions on the various Geo-Political concerns that are plaguing the market. The US China trade situation is dominating market chat with Brexit a very close second and the majority of market players’ opinion is skewed to the downside on both issues and it seems to only concrete evidence of progress will change that sentiment in the current environment.
We’re set for a mixed start to the Asian trading day this morning with investors looking to see if the late rally in the US markets can flow through to local markets or if yesterday’s pessimism will come to the fore again. It’s quiet in terms of fundamental data releases today until we hit the US open when the latest job reports are due. Once again expectation is for a strong Non-Farm payroll number near 200k and given the volatility we’ve seen across financial products this week, anything away from consensus will see strong moves across the market.