Global stock indices dropped yesterday as growth concerns on the back of increasing pessimism about the trade discussions between the US and China hit the market. The technology sector led the way down in the US with the Nasdaq finishing the day down 1.91%, the S&P and Dow weren’t too far behind closing out the session down 1.42% and 1.22% respectively. Haven assets gained strengh with the Jpy and Gold both performing well and the dollar held its ground, the Dxy once again trading around the 96.30 level on the US close. Sterling got a shot in the arm from better than expected jobs data but the Brexit saga rolls on and traders are expected more volatility from that quarter going forward. Commodities also took a bit of a hit with Oil trading off of it’s recent highs with WTI trading back at $53/b and Brent dropping off to $61.5/b.
Investor concern has been building over the last couple of weeks that a positive deal between the US and China may not be coming anytime soon with little in the way of firm details of an agreement coming from either side. Tweets from President Trump early in the Asian session heightened the tension yesterday and traders will continue to monitor and react to comments from both side until we get some concrete evidence of progress. With the US government shut down still rolling on markets and more earnings reports due out today markets will remain cautious.
This morning we’ve seen Kiwi CPI data come out better than expected by 0.1% on both the Quarterly number and the Yearly and this has led to a jump in the Kiwi dollar both against the greenback and on the crosses. It’s unlikely to have a significant impact on the RBNZ’s thinking in the current environment but should keep the ‘flightless bird’ well supported over the next few trading sessions.
Looking at the rest of the days trading and the main focus for the Asian session will be the latest Bank of Japan policy rate announcement where there is no chance of a rate change, however traders will be looking at the statement and press conference details closely for any change of stance from the central bank especially in light of recent poor data prints. In the London session there’s little in the way of data releases due but we do have MPC member Broadbent speaking as well as the ongoing WEF meeting in Davos. Focus will move to Canada on the open of the New York session with the latest Retail Sales numbers due for release before investors turn the attention firmly back south of the border to the US markets and the latest raft of earnings reports.