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James Hyerczyk
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Risk Ahead

The major Asian stock indexes were trading mixed on Tuesday as investors waited for guidance from U.S. equity markets, which were closed on Monday for the Labor Day holiday. Gains were limited by concerns over U.S.-global trade disputes and faltering emerging market worries.

At 0531 GMT, Japan’s NIKKEI 225 was trading 22660.13, down 42.49 or -0.19%. Australia’s S&P/ASX 200 Index was at 6282.80, down 28.10 or -0.45% and China’s Shanghai Index was at 2715.73, down 5.01 or -0.18%.

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At the start of the week, stock market investors will be tuned into the resumption of trade negotiations between the United States and Canada. Early last week, global equity markets were supported by the announcement of a new trade deal between the U.S. and Mexico.

Traders are also watching developments in the emerging markets which could threaten the stability of the Asian continent after China released a disappointing Caixin/Markit Purchasing Manager’s Index (PMI). It came in at 50.6, its lowest level since June 2017, as export sales fell for a fifth consecutive month. A move under 50.0 represents a contraction.

Additionally, on Monday, Indonesia’s Rupiah fell to its weakest level in more than 20 years and the country’s central bank reportedly said it would intervene in foreign exchange and bond markets.

Forex

The U.S. Dollar is trading steady-to-better against a basket of currencies early Tuesday, posting small gains versus the Euro and Japanese Yen, while losing a little ground against the Australian and New Zealand Dollars.

Safe-haven demand is helping to underpin the dollar against emerging market currencies including the Argentine Peso, Turkish Lira, South African Rand, Brazilian Real, and Indian Rupee.

In Australia, the Reserve Bank kept official interest rates unchanged for a record 25th consecutive month. It made no changes to the key final paragraph of the statement, noting “further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual”.

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Crude Oil

U.S. crude oil prices are trading a bit firmer early Tuesday after two Gulf of Mexico oil platforms were evacuated in preparation for the arrival of newly formed Hurricane Gordon. The weather system was a tropical storm as it passed the west coast of Florida late Monday afternoon. However, it quickly became a hurricane as wind speed picked up as the storm passed over the warm waters of the Gulf of Mexico. It now appears to be headed along a path toward refineries in Louisiana, prompting the evacuation of the oil platforms.

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