Markets calm, Trump attacks Powell again

Summary:

• Asian stocks trade higher following some gains in the US on Tuesday

• Currencies little changed, increased risk appetite still present though

• US President Donald Trump criticizes Jerome Powell once again

Little higher

Stock markets in Asia have been able to add some gains during Wednesday's session following rises seen on Wall Street the day before. The Hang Seng (CHNComp) is trading 0.9% higher while the Shanghai Composite is adding 0.8% at the time of writing. In turn, the Japanese NIKKEI (JAP225) closed 1% higher while the Australian S&P/ASX 200 lost 0.05%. Today’s gains seen in Chinese markets could be a sign that investors still hope that Donald Trump and Xi Jinping will be able to make some progress in terms of an ongoing trade dispute when they meet in Argentina this weekend. Let us remind that the US President threatened yesterday that it could impose duties on all remaining Chinese imports if negotiations fail to produce a trade agreement (to be honest, a binding deal is unlikely to be struck in Buenos Aires but one may hope that the two sides will work out an outline of it). During Asian hours trading we got a bunch of comments from China’s ambassador to the United States suggesting that China is unlikely to dump US Treasuries if the trade dispute worsens as it would destabilize financial markets, and it could backfire thereafter. From a technical standpoint the Hang Seng is again attempting to break through its crucial resistance in form of the 100DMA. The last two tries ended up with a bears’ victory - the rest of the week could be quite volatile as investors might want to sell their holding before the scheduled Trump-Xi meeting. Therefore, a sustained breakout of the blue line seems to be unlikely this week, however, one cannot rule out this scenario if a ‘miracle’ occurs during the G20 summit and both the US and China will cease fire in the trade battle.

The Hang Seng is trying to break its important resistance. The two past attempts failed underlining the importance of this line. Source: xStation5

Antipodean currencies rise, Trump attacks Powell

Looking at the currency market one may notice that trends present yesterday are still in place on Wednesday. Namely, Antipodean currencies are on the rise this morning (0.1-0.2% against the US dollar) while the Japanese yen is trading slightly lower. In case of the Australian dollar its performance could be a bit weird given the data we got overnight. In the three months through September construction work completed decline 2.8% QoQ missing the consensus of a 0.9% QoQ increase. This is the first (negative) input to third quarter GDP (will be published on December 5) suggesting that the rate of growth might have slowed down even more than initially thought. During the upcoming days we will be offered subsequent readings serving as ingredients to build the consensus ahead of a GDP print.

Australian construction work done in the third quarter did not decline more due to a strong increase in the public sector. The private sector’s construction work completed (4Q rolling sum, YoY) fell for the first time since Q2 2017. Source: Macrobond, XTB Research

Finally let’s mention Trump’s remarks concerning Federal Reserve Chairman Jerome Powell. The US President renewed its critics against Powell telling the Washington Post that he is “not even a little bit happy with his choice to head the central bank.” Trump continued telling the newspaper that “They’re making a mistake because I have a gut and my gut tells me more sometimes than anybody else’s brain can ever tell me.” The US President is obviously attacking Jerome Powell because of higher rates which have dampened an impact coming from tax cuts.

The Australian dollar seems to be poised to bounce off the lower bound of the bullish channel. If so, a move toward 0.7310 may be expected and then a further rally toward the upper bound of the channel. Source: xStation5

In the other news:

• Donald Trump may cancel his meeting with Vladimir Putin over Ukraine at the G20 summit

• Bank of England, the UK government and the Financial Conduct Authority (FCA) will issue assessments for various Brexit scenarios on Wednesday

• European Union will open deficit procedures against Italy before Christmas

• API reported US oil inventories rose 3.45 million barrels last week against an expected 0.8 million barrels rise