Talking Points
- Asian markets drifted lower with risk appetite diminished
- The Australian Dollar took a beating after rates were left on hold, even though this was expected
- Markets are apparently looking toward US President Trump’s meeting with China’s Xi Jinping
Asian markets slipped on Tuesday in a session of distinctly muted risk appetite, which followed a weaker Wall Street close on some softer US economic numbers.
Japan’s Nikkei 225 ended down 0.9%, with a stronger Yen weighing on automakers. Australia’s ASX also ended in the red, if to a lesser extent. It fell 0.3%. Financial stocks were heavy there after the Reserve Bank of Australia kept interest rates on hold, and seemed in no hurry to raise them from their current record low, even though no other outcome was seriously expected. Chinese and Taiwanese stocks were once again out of the game thanks to holidays.
The Australian Dollar slid against its US cousin. The RBA probably didn’t help but the Aussie is also very much a “risk on” asset and tends to do worse when investors are more worried about global growth levels. Such worries are palpable at present as markets await this week’s Florida summit between US President Donald Trump and his Chinese opposite number Xi Jinping. Australian trade data were initially supportive of their home currency. However, comments from the central bank, to the effect that a stronger Aussie would complicate the economy’s transition away from mining reliance, saw it fall even though they've been made often before. The South African Rand continued to struggle after Monday’s not-unexpected reduction of that country’s sovereign credit ratings to “junk” status by the Standard & Poor's agency.
Notwithstanding its weakness against the Yen, the US Dollar was higher against the basket of currencies which make up the Dollar Index.
Crude oil prices were flat despite wire reports that Libya’s considerable Sharara oil field was back in production after a one week hiatus. Gold prices hit one-week highs, rising about 0.2%.
The rest of global Tuesday’s economic data has a US flavor, with trade and durable goods sale orders on offer. The other side of the Atlantic will make some contribution to the day’s affairs however, as European Central Bank President Mario Draghi is due to speak in Frankfurt.
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--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
