Asia market update: Not all is well in Tokyo this morning

Equity markets

Investors are back focusing on worst-case scenarios despite overly accommodating central bank policies. Not only are they curious to see what if any economic frights are lying in wait after the latest round of weaker exports from a host of Asian economies, but are back focusing on trade war risk given the fact nothing has altered the current deadlock to any notable degree, which is a bit worrisome.

And with no movement on the China/US soft-pedal commitments made in Japan concerning the delay of new US tariff increases, pledges of Chinese purchases of US agricultural products and a loosening of the US ban on Huawei, markets have returned to an elevated state of caution.

All the while, the recessionary vs precautionary rate cut debate goes on.

Oil markets

Asia oil traders are showing a level of apprehensions to chase the overnight sell-off lower.  There remains a high level of scepticism over possible Iran -US talks, after all, it was only a few weeks ago the US administration hawks were calling for bombs away suggesting that some traders are viewing middle east risk premium cheap at current oil prices.

No one appears willing to take the plunge lower just yet although the mood is bearish, especially with equity markets selling off.

Gold markets

I think Gold markets have run too far ahead of currency war reality as Asia has remained much better sellers on the  day  but prices remain supported  by risk aversion as USDJPY took out the support at 107.80 support that has held over the past couple of sessions, as US S&P futures and the Nikkei sell-off, continuing the weaker theme from overnight.

Currency Markets

Flows have been dominated by risk aversion as USDJPY took out the support at 107.80 support that has held over the past couple of sessions, as US S&P futures and the Nikkei sell-off, continuing the weaker theme from overnight.

Australian Employment

The primary takeaway from the Australian labour market data is that full-time employment increased. That is a decent positive for AUD.

Bank of Korea

We had it 50:50 going in but the initial knee jerk higher 1184 from 1181 after the Bank of Korea  rate cut announcement suggests some were surprised, but it proved to be short-lived, and the pair have quickly reverted to where it was pre-Bank of Korea levels as the USD has been under a bit of pressure today on risk aversion flows into JPY.

Bank Negara Malaysia

The Bank Negara Malaysia appear content with the overall balancing act between short term rates and currency markets as currency market stability fosters improved capital markets sentiment.

Action has slowed to a crawl mind you, but we maintain our bullish Ringgit view as we expect the Fed to either cut 50bp or cut 25 bp with extremely dovish forward guidance.

The Thai Baht

The Baht has been trading flat, but with Thailand tourist chief suggesting the stronger local currency is weighing on tourism, we continue to expect some stronger response from the Bank of Thailand.