Asia Eyes Internal Reform, Europe Down On Growth Fears, US Market Waits On FOMC

Asia Was Broadly Higher Ahead Of Deng Xiaoping anniversary

Asian equities were broadly higher in Monday trading as traders eye an anticipated speech from Chinese President Xi Jinping ahead of the Deng Xiaoping anniversary. The anniversary marks 40 years since reforms within China opened its doors to foreign trade and comes at a time when Chinese reforms are desperately needed.

With Chinese/US trade relations the worst they’ve been in decades there is an expectation President Xi will begin implementing new reforms.

The Australian ASX led Asian indices higher with a gain of 1.00% on strength in financials and mining but nearly all sectors were showing gains. The Nikkie was next strongest with a gain near 0.60% while the Shang Hai and Korean Kospi both close with gains near 0.10%. The Hong Kong Heng Seng was the only major indices in the region to close in negative territory.

European Markets Fall On Global Growth Worry

European markets fell on Monday despite optimism in Asia. A report issued by the Bank of International Settlement over the weekend warns volatility and sharp market sell-offs are not over and that has the market edging lower.

Shares of ASOS fell the hardest. The UK retailer cuts its full-year forecasts on signs of slowing growth and led the entire retail sector to a loss of -1.0%. Shares of ASOS itself shed a gaping 36% by midday and were heading lower.

The French CAC was in the lead at midday, down around -0.80% for the early session. The German DAX was close behind with a loss near -0.75% and the UK FTSE was close behind that. The BIS report, coupled with last week’s weak Chinese retail sales and industrial production data, were the primary causes of today’s declines.

US Markets Edge Lower Ahead Of The FOMC

US index futures were indicated flat in the earliest hours of today’s pre-open session and then slowly fell as the opening bell approached. The BIS report, weak data from China, and fear of an upcoming government shut-down all played a role. The BIS report is really nothing new, traders have been expecting the same for some time, the problem is that it puts the issue front and center where it can’t be ignored, market volatility is going to be around for a while.

Traders are now turning their focus to an FOMC policy statement due out on Thursday. The central bank is largely expected to raise rates by a quarter percent and to indicate a slow-down or pause of future rate hikes until data shows inflation has returned to acceleration. A variation from this outlook is likely going to spark a major move in equities and currencies. The DXY Dollar Index fell in early Monday trading but is hanging near a long-term high, just under major resistance, and is set to make a big move when the FOMC statement is released.