Asia Pacific (APAC) stocks depreciated reasonably across the board as the region trailed behind losses on Wall Street, where the S&P snapped a four-day winning streak and the Nasdaq underperformed on the back of the sell-off in major tech stocks.
ASX 200 (-1.2%) was weighed on by the losses across its strong miners and financials. KOSPI (-0.6%) took a breather from yesterday’s underperformance, and as new cases in South Korea continue to decline in pace. Hang Seng (-1.9%) was pressured by a number of large cap stocks in the red and with fears that the closure of the US consulate in Hong Kong is in China’s arsenal, although this would be similar to a nuclear option.
Shanghai Comp (-2.3%) underperformed as investors took chips off the table amid China’s retaliatory move, whilst experts cited by Global Times stated that Beijing could also consider a targeting strike such as expelling hundreds or more US diplomats in Mainland and Hong Kong. As a reminder, Japanese markets were closed in observance of National Sports Day Holiday.
In commodities, WTI and Brent front month futures gained but with some struggle, amid quiet news-flow and low volumes. Traders will be keeping tabs on the National Hurricane Centre updates after Tropical Depression Eight evolved into Tropical Storm Hanna, with a warning extended Southwards. According to Barclays, they have warned of a probable price correction in case of slowing demand, where they are expecting Brent Crude to average $41 a barrel and WTI Crude to average $37 per barrel this year. For next year, the bank has a more optimistic view, expecting Brent to average $53 and WTI to average $50 a barrel.
Moving into the currencies market, a hint to the overall USD’s performances is by looking at the USD Index (DXY) performance, which held onto losses sub-95.000 throughout the entirety of the session. This was mainly due to a trifecta as presented below;
US stimulus delays
Rising jobless claims in the US
Building US-China tensions
The USD/JPY saw a 30-pip move lower across a few minutes, which prompted the pair to eventually dip below 106.50 and continue trundling lower as risk-aversion intensified despite the absence of fresh fundamental catalysts as liquidity in the region remains low with Japanese players away on a long weekend. EUR/USD traded choppy on either side of 1.1600 after drifting from highs of ~1.1620.
Just like most of its European neighbours, Germans too have been ravaged by a global health emergency and it is facing the worst recession in its post-war history, with rising unemployment and collapsing exports and manufacturing output. The mood among Germany’s captains of industry is quite bleak so far.
Potential instruments to Trade: EUR crosses.
11.00 – EUR Markit PMI Composite
European markets are heading for a lower open this morning, as flaring of diplomatic tensions between US and China continues to weigh on sentiment. The forecast for the Eurozone flash manufacturing PMI (due at 0800 GMT) shows 50.0 for July vs. 47.4 seen in the previous month. The Eurozone services sector PMI is seen bouncing to 51.0 in the reported month vs. 48.3 previous.
Potential instruments to Trade: EUR crosses.
11.30 – UK Markit Services PMI
The Markit/CIPS UK Services PMI (Purchasing Managers’ Index) is based on data collected from companies in the transport and communication sector, financial intermediation, business services, personal services, computing and IT and hotels and restaurants. GBP investors are becoming increasingly concerned about Britain’s economic recovery from the coronavirus pandemic in addition to the release of July’s CBI Industrial Trend survey which fell yesterday to a worse than expected 46%.
Potential instruments to Trade: GBP crosses.
Coronavirus Status Update
US COVID-19 cases rose by at least 66,064 (Prev. +69,659), whilst deaths rose by at least 1,112 (Prev. +1,101), according to a major newswires tally. California COVID-19 cases +2.9%/12,040 (prev. +3.2%/+12,807), deaths +157 (prev. +115). Texas COVID-19 cases +9,507 (prev. +9,879); deaths +173 (prev. +197); hospitalisations data is incomplete due to new federal requirements. Houston, Texas ICU Phase 2 surge capacity now at 27% occupancy, seeing Houston ICU occupancy rate rise to 108%.
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