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Asia Stocks May Echo S&P 500 Gain on Trade War Reliefs, JPY Falls

Asia Stocks May Echo S&P 500 Gain on Trade War Reliefs, JPY Falls

Daniel Dubrovsky, Strategist

Asia Pacific Market Open – Brexit, Tariffs, Trade Wars, US Dollar, S&P 500, Australian Dollar

  • US stocks brush off European declines, aided by reassuring trade news from the White House
  • US Dollar gains on Fed commentary, British Pound undermined by the latest Brexit headlines
  • Asia Pacific stocks may gain, boosting AUD and NZD. Anti-risk Japanese Yen stands to lose

BACKGROUND: A Brief History of Trade Wars, 1900-Present

While Asia Pacific benchmark stock indexes brushed off increased fears of a US China trade war during the early hours of Tuesday, European ones could not. After the Nikkei 225 closed 0.64% higher, the Euro Stoxx 50 and DAX plummeted 0.20% and 0.40% respectfully. Political uncertainty and tariff concerns seemed to have undermined the region.

For one thing, the Euro edged cautiously lower amidst a report from the German business magazine WirtschaftsWoche. It warned that US President Donald Trump could place duties on imported cars perhaps next week. Meanwhile, the British Pound was the worst performing FX major given the latest Brexit headlines out of the UK that casts uncertainty over Prime Minister Theresa May and her leave proposal.

The US Dollar got a boost later in the day thanks to commentary from Fed Vice Chairman Richard Clarida who helped it outperform against the Singapore Dollar and other ASEAN currencies as anticipated. Mr. Clarida backed gradual hikes after previously citing concerns about global uncertainties which hurt the greenback at the time.

Meanwhile US stocks brushed off weaknesses in European equities, bolstered by reassuring commentary on the trade front from White House Economic Adviser Larry Kudlow. He mentioned that Donald Trump is open to a deal with China, countering worrying remarks from him yesterday. By the end of the session, the S&P 500 finished +0.33% higher as the pro-risk Australian and New Zealand Dollars edged out gains.

With that in mind, we may see APAC shares echo the outperformance from Wall Street which would bode ill for the anti-risk Japanese Yen. This may also add upside momentum to AUD and NZD.

US Trading Session

Asia Stocks May Echo S&P 500 Gain on Trade War Reliefs, JPY Falls

Asia Pacific Trading Session

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** All times listed in GMT. See the full economic calendar here

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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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