Asian Stocks Talking Points:
- Markets were lower across the bord
- Australian growth data came in weak, which didn’t help and already gloomy mood
- The Dollar remained under pressure with Treasury yields in focus
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Wednesday was always going to be tough for Asia Pacific stocks given the clobbering Wall Street took in the previous session. US investors took fright as they fretted the details of last weekend’s US/China trade truce and worried about the possibility of economic deceleration ahead.
These worries were hardly lessened in Asian hours by a third-quarter Australian Gross Domestic Product which came in well below forecasts. Bulls may cling to the thesis that, even now, Australia is growing more strongly than many comparable Western economies, and look with hope to a real trade deal between Washington and Beijing. That would surely see the Australian economy accelerate again. However, the most recent data were a disappointment.
The Nikkei 225 was down 0.6% as its close loomed Wednesday. Shanghai was off by 0.7% with the Hang Seng down 1.8%. The ASX 200 slipped 0.8% with the banking sector under special pressure. Those weak Australian growth numbers suggest that local interest rates will be staying at their already venerable record lows for the foreseeable future.
The US Dollar remained defensive as the markets surveyed a bit of yield curve inversion in the US. This was visible in the yields between three and five years, and between two and five years. It suggests that worries about an economic slowdown are becoming entrenched. Still, the Australian Dollar’s weakness against the greenback was also clear.
AUD/USD has now it seems failed to hold at the three-month highs seen late last month.
Although its dominant uptrend still clearly endures, current price action suggests that that trend’s base will be tested either later this week or early next. Gold prices slipped back a little from its recent one-month highs while crude oil prices slid further on growth worries and signs of rising US supply.
There remains plenty of economic meat still to chew over on Wednesday’s bones. Purchasing Managers Indexes are coming up from various European countries, including France, Germany and the UK. The Bank of Canada will give its interest rate dispensation, with no change expected. From the US will come the non-manufacturing snapshot from the Institute for Supply Management and news of mortgage application levels. The employment survey from Automatic Data Processing is also due, along with crude oil inventories from the Department of Energy.
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--- Written by David Cottle, DailyFX Research
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