A Very Different Start To The Week In Asia

Last Friday, Asia was dominated by negative sentiment over trade talks, this Monday morning, it's all smiles and optimism again. This could go on a while. 

171018-image-china_us_trade_war.jpg

In, out, in out, shake it all about...

I could probably pre-write my next morning note, basically reversing all the comments and all the market implications of today's missive. Perhaps there is a clever AI semantic programme out there that could do it for me, saving me the trouble of even getting out of bed? 

Today seems the exact opposite of last Friday, where a sour trade-mood was working on markets, hurting risk assets, providing some support to the USD (despite dreadful retail sales figures) and weakening Asian FX across the board. 

China, at least, is expressing some optimism on the talks. The US is sounding more guarded, though the US President seems to be more optimistic than some of his negotiators. Perhaps the worst outcome now might be an extension of the March 1 deadline to provide more time. That leaves room for plenty more 180 degree turns in sentiment before, we assume, some eventual "deal" is reached. And consequently, plenty more opportunity for markets to rally, then fade, then rally, then fade...

Cars

One item that may flip the trade-mood back to sourness, is the expected decision on the national security threat to the US of auto imports.The report is due this week from the Commerce Department. Some speculate that this could result in tariffs of 25% on foreign cars. This is not just an Asian problem, though of course, big automakers Korea and Japan would be in the crosshairs. Importantly, this also drags the EU back into the fight and could see EURUSD break out on the downside which could see spillovers into Asian currency weakness especially for those currencies with basket-peg arrangements.  

Asia Day / week

Check out Prakash Sakpal's Asia Week ahead piece for detail of forthcoming releases and events. We'll write up this morning's Singapore NODX numbers separately if there is anything of interest to note. It's also Budget-day in Singapore today. The trade-centric city-state will try to strike the right tone of prudence, while at the same time providing domestic support against a softening external environment. As Prakash notes, Singapore has the financial strength to pull this off. 

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