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A bit of the feel-good factor has temporarily abated

Markets 

A bit of the feel-good factor has temporarily abated for local equity markets after Samsung Electronics quarterly sales missed the mark in what is yet another casualty of US-China tensions which has triggered a drop-in demand for memory chips and flat mobile device sales in China.

When Apple sounded the alarm bells this quarter, there was some thought the drops in China sales was an anti-Apple backlash due to escalating  US-China tensions. But these Samsung results are quite damning suggesting there are a broader-based retail and manufacturer slowdown afoot.

Currency Market Updates

Local Asia currency traders are looking to confirm yesterday’s bearish break on USDCNH which was established with a close below 6.85. But today the dollar is trading on better footing as some predictable jitters are appearing ahead of US-China trade negotiations.

The difficulty trading the USD is trying to factor in just how much of a driver the balance sheet will be going forward. It’s not only the dots traders are contending with as the Fed is now juggling two tightening paths, one is the balance sheet the other is rates. Given we are nearing the end of the rate hike cycle the balance sheet runoff will be the crucial catalyst for dollar sentiment kick off 2019. So even if the Fed is willing to trim their rate hike forecasts,  an orderly run-off on the balance sheet will ultimately keep USD dollar in short supply and most likely in demand if global central bank policy remains as is.

Oil  Market Updates

Despite OPEC officials suggesting that the Kingdom may be contemplating more significant cuts in a bid to support higher oil price, the market is sputtering out of the gates in Asia. The sentiment is driven by a combination of pre-US-China trade negotiation jitters and the usual assortment of what-ifs: is China economy stagnating after HK horrible retails sales prints while doubts if the US economy is rolling over or coming out of a soft patch linger. Also, prices while losing a bit of background support from global equity markets which are trading a bit wishy-washy today.

However, with the Pboc and now the Fed providing an adequate backstop to risk sentiment, coupled with OPEC clear commitment to push prices higher, dips should remain in demand.

Gold 

Gold is trading lower today on the back of the US dollar showing early signs of shaking off its recent bout of Fed-induced weakness.  On the topside, the positive chatter around US-China trade tensions will temper expectations.

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