Dollar falls for a third day, trade talk in focus | CMC Markets Daily Commentary
The US dollar index fell for a third day to 97.8 area this morning, as the US industrial production unexpectedly fell 0.8% in the month of Oct. the output for manufacturing, mining and utilities sectors all fell, suggesting that the global cyclical slowdown is deepening. Weakness in manufacturing sector was mainly attributed to motor vehicle production, which fell a whopping 11.1%. Mining production fell 0.7%, and utilities fell 2.6%.
Despite of weaker manufacturing and industrial data, US consumer sentiment remains resilient, as suggested by an upbeat retail sales growth of 0.3% MoM. Inflation is likely to stay tepid as industrial output slows in America and PPI slumped rapidly in China for the past few months, creating little price pressure.
Market does not anticipate another Fed rate cut until July 2020, according to CME’s FedWatch tool, which shows less than 50% probability of a rate cut through to June 2020.
Market focus this week will still lies on the US-China trade talk, and updates in Hong Kong. Hong Kong domestic economy is on the verge of a recession as recent riot has adversely hurt its retail, service, tourism, aviation, education sectors and has caused severe reputational damage to the city as one of Asia’s most important financial hub.
For the market, however, opportunity usually emerges when bad news are fully exposed and digested. After falling 1,500 points in a week, the Hang Seng Index may set for a technical rebound this week as bargain hunting starts.
Technically, Hang Seng Index has hit a 61.8% Fibonacci Retracement level at around 26,400 points. This is usually a key support level. If 26,400 is broken, it may retrace further to 76.4% level of 26,060 points. Momentum indicator DMI and RSI suggest that the index has been temporarily oversold and may embrace a rebound.
In Singapore, the Straits Times Index fell 50 points, or 1.5% in the past six trading days. The performance is relatively resilient comparing to Hang Seng’s 5.3% drop for the same period of time.
SingTel’s share price slumped 3.3% to S$ 3.19 following a historic first quarterly loss of S$ 668 million, largely attributed to Bharti Airtel’s exceptional provision. Dividend policy remains unchanged at 17.5 cents for the year to Mar 2020.
In the short term, trade negotiations and the unrest in Hong Kong are two major factors that suppress the risk appetite across Asian. A ‘relief rebound’ is highly likely if any of these two issues were resolved properly.
Hong Kong 50 – Cash
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