Asian stock indices were set to open on the back foot this morning as more US earnings figures disappointed before news hit the market that the US is going ahead and charging Huawei with criminal charges. With trade talks between China and the US set to take place this tomorrow, investors will have serious doubts now on how much will actually be gained and even if the Chinese delegation will turn up. Risk trades had backed off across the board and the dollar experienced a mixed day although still trading well off last weeks levels with the Dxy at 95.75. Commodities also dropped off in the US session with Oil still very much in focus as it had its worst day in a month, WTI dropped under $52/b despite Saudi advice on production cuts as global growth concerns continued to weigh.
The key focus to today’s session in Asian will be to see what kind of a reaction we get from China with regard to the latest development with Huawei. China’s Foreign Minister had only last week advised of the importance of the company to the country and despite US claims that the trade talks and the Huawei issues are separate, it’s unlikely that it will be viewed that way in Beijing. Investor optimism had started to increase during the last couple of trading days but this issue could really set back any potential progress.
Sterling dropped off recent highs in the London session ahead of tonight’s next key Brexit vote in parliament as European officials advised that the continent is preparing for a hard exit. Theresa May is now backing a plan to ditch the controversial Irish back stop in a bid to win the support of her party even though this will mean fresh negotiations with the EU. Sterling traders are expecting further volatility in the markets as the debate heats up and the vote approaches.
Looking ahead to the rest of today’s trading and once again it looks set for the news wires and sentiment to dominate flow in the markets. Its thin on the ground in terms of tier 1 fundamental data releases with just the US Consumer Confidence number later in the day. US-China issues will remain front of mind in the Asian and US sessions with Brexit once again set to dominate in London and Europe.