Asia markets update
The weekend headlines have not been a blessing for ‘risk sentiment” and while the optimist in me is siding on, this too shall pass. But with markets closed in Japan, China and South Korea as a large part of Asia celebrates the Mid-Autumn festival, it's impossible to gauge sentiment in these drastically diminished liquidity conditions.
Hong Kong markets are trading poorly but it's difficult to separate the wheat from the chaff after last Friday the PBOC announced they would issue T-bills via the HKMA in China which implies driving local interest rates higher. But of course, shelving the US-China trade talks is not rated highly for local risk sentiment either, a bit of a double whammy of sorts today for Hong Kong.
However, it was unlikely that either the US or China was going to pull a rabbit out of the hat before the US midterm election anyway. However, traders remain in wait and see mode while treading rather gingerly in today Asia session. But indeed, this discussion will likely continue throughout the 24-hour trading cycle.
But overall, no one is taking anything for granted and certainly won’t underestimate the possibility of the US announcing reviews of further China tariffs at some point in time given the Trump administration ‘modus operandi’ of applying non-stop pressure.
Currencies
More risk-sensitive currencies, especially EM are feeling the pinch from weekend headlines bluster, but liquidity is extremely thin and likely contributing to some outsized moves. For reference, G-10 volumes are around 50 % lower as per EBS data. But what action we are seeing is small AUD selling.
Indian Rupee
Not too surprising the INR back under pressure from rising crude prices and domestic credit wobbles after one of the large Non-Banking Financial Companies missed an interest payment last Friday
Oil Markets
Oil investors are trading the weekend news very favourably, Saudi Arabia and Russia ruled out any expeditious supply increases at the Algeria meeting while decidedly ignoring US President Trump’s call to increase supplies and ease price pressures.
Not a great deal of oil market noise today, but traders are quick o the pivoting is to US inventories data with some small discussion around reports that Cushing Oklahoma delivery point may have declined further in the week ended September 21. But ultimately all these noises pale in the lead up to November 4 Iran sanctions, which continue to underpin sentiment.