The eye of the hurricane


Robust retail sales data from the United States overnight stopped the rot to some extent on global markets after the previous day’s route on equity markets. Bond yields continued lower however with the US 30-year trading to a record low at 1.916% as China warned of impending retaliation to new US tariffs starting on 1 September.
Wall Street finished a nervous session broadly unchanged, which in the context of this week’s price action, could be considered a win. The S&P 500 rose 0.25%, the Nasdaq fell 0.25% and the Dow Jones carved out a respectable 0.40% gain. Consumer staples and utilities led the gains with transport stocks severely lagging, reflecting the nervousness about the global trade outlook.

Elsewhere, oil and gold weren’t buying into the equity market stabilisation story with gold continuing to rise and oil suffering another miserable day.
Over in Asia Pacific this morning, New Zealand’s PMI entered contractionary territory, falling to 48.2, once again reflecting slowdown fears in global trade. One bright spot was Singapore, with the balance of trade and non-oil exports both beating expectations at USD2.83 billion and 3.7% respectively. This may well be a dead cat bounce however, after a procession of poor data results from the city-state in recent times.
We have a slew of GDP data in Asia today from Malaysia, Taiwan and Hong Kong. All will be watched closely for further evidence that the US-China trade war continues to erode global growth.

Overall, US data continues to be a bright spot in a dark economic universe. China’s comments this morning suggest any movement on trade issues, between it and the Americans, is as far away as ever. Bond markets and gold are still signalling that a recession is still very much on the cards; it’s just a matter of how deep it will be.
An almost inevitable consequence of America’s still high yields, in a global context, and its economic outperformance should be a stronger dollar. Watch out for more Trump tantrums and Fed bashing, as the President’s social media account potentially goes into overdrive. Today most certainly feels like the eye of the hurricane rather than the passing of the storm.


The dollar enjoyed modest gains overnight, supported by bond market inflows and the relative calm of the stock market. The dollar index rose 0.10% to 98.09 with gains against most of the G-7 currencies.
Regional currencies have proven to be surprisingly robust this week, perhaps because much of the bad news was already priced in. That detente may not continue for long if the equity sell-off resumes in earnest and bond yields continue to tank.


Regional markets including Australia, Japan, Taiwan and China are broadly flat this morning in line with Wall Street’s finish. Singapore is a noted underperformer, falling more than 1% today suggesting that local markets are taking this morning’s positive data with a very large pinch of salt.
Regional GDP releases have the potential to take the wind out of Asia’s sales ahead of the European session, but overall stock markets appear to be mixing relief with a wait-and-see attitude.


Oil had another tough day at the office overnight with Brent Crude falling 1.90% to USD58.35 a barrel and WTI dropping 0.9% to USD54.75 a barrel. Both have rebounded in Asia with WTI moving higher by 0.9% and Brent up 0.6%.
The rebound has a corrective look about it on thin volumes, rather than a beachhead for an impending rebound. GDP prints in Asia have the potential to nip the nascent rally in the bud, and black gold remains vulnerable to panic movements on the bond and equity markets.


Gold has been a bellwether indicator of the global sentiment of late, rising aloof above the noise of the equity markets. It has continued to stubbornly signal that if the global trade outlook remains the same, a recession is on the way in some shape or form.
Gold ignored a stronger dollar overnight, rising 0.40% to USD1,523.00 an ounce overnight. Prices are flat today in Asia, but the yellow metal continues to benefit from safe-haven inflows, which should ensure that any pullbacks are limited ahead of the weekend.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia.Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.

Jeffrey Halley

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