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Asian, European Investors Tread Water while U.S. Takes Holiday

By:
James Hyerczyk
Published: Jul 5, 2019, 01:48 UTC

Asian imvestors are eyeing the micro U.S. jobs report that will likely have an impact on Fed policy, and the macro U.S.-China trade relations that could determine whether there is a global recession.

Stock Market Tensions

The U.S. markets were closed on Thursday for Independence Day. Looking at the previous day’s price action, smart money in Asia and Europe was likely on the sidelines ahead of Friday’s U.S. Non-Farm Payrolls report, and it’s a 50/50 proposition whether the major U.S. players will even show up for this event.

We could see some volatility, but it will likely be triggered by someone trying to make a name for themselves in a thinly traded market. There’s hardly any reaction to the jobs report until the following Monday during normal times so I am not expecting this report to be any different. If there is a major surprise then the big players will fix the market in their favor next week before deciding on which way they want to take the market.

European Market Recap

European shares finished mixed on Thursday on low volume even after the Dow Jones Industrial Average and NASDAQ Composite both closed Wednesday’s session at all-time highs. Nonetheless, the major indexes remained underpinned by low Treasury and Bund yields. The catalyst was the ADP private sector jobs report which came in well below expectations, strengthening the Fed’s case for lowering rates at its monetary policy meeting at the end of July.

Events in Italy grabbed some headlines after the country averted European Union disciplinary action over its public finances after convincing the European Commission that measures submitted earlier in the week would help bring its growing debt in line with EU fiscal rules.

In other news, according to Reuters, Deutsche Bank is preparing a sweeping 5 billion Euro ($5.6 billion) overhaul in the coming days with its investment banking business expected to take a major hit. This may actually be good news for the stock.

Asian Market Recap

Asia-Pacific shares were also mixed with many of the major traders keeping their powder dry ahead of Thursday’s U.S. holiday and Friday’s U.S. jobs report. The major indexes in Japan, South Korea and Australia finished higher, while shares in mainland China and Hong Kong retreated.

Investors are eyeing the micro U.S. jobs report that will likely have an impact on Fed policy, and the macro U.S.-China trade relations that could determine whether there is a global recession.

Nearly a week after U.S. President Donald Trump and Chinese President Xi Jinping greenlit the restart of trade negotiations between the two economic powerhouses, White House economic advisor Larry Kudlow said late Wednesday that face-to-face negotiations between the Washington and Beijing would begin “soon”.

The key word is “soon”. In saying so, Kudlow was referring to face-to-face meetings. Meanwhile, another official from the Office of the U.S. Trade Representative said later that the two sides were in the process of scheduling a principal-level phone call with Chinese officials for next week.

Kudlow went on to say, “I don’t know precisely when. They’re on the phone. They’re going to be on the phone this coming week and they’ll be scheduling face-to-face meetings.”

It’s probably safe to say that U.S.-China trade relations are on the backburner for now with most investors focusing on central bank policy, the direction of interest rates and the strong possibility of a global economic slowdown.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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