Risk seekers drift back to global shares

Risk seekers keep drifting back

Summary

Optimistic comments by the White House's economic adviser, ahead of trade talks between China and the U.S., are tempting buyers back to global shares.

Saturday night in Buenos Aires

Investors continue to drift back to higher-risk exposure after optimistic comments by White House economic advisor Larry Kudlow. Yet, by the start of U.S. business in the middle of the week, despite “a good possibility that a deal can be made”, there’s still no agenda for Trump-Xi discussions over dinner on Saturday night. And just below the top level, there are no plans for conversations between top advisors, according to Kudlow. Circumstantially then, best efforts for these arrangements still have a ‘basic’ air. That points to limited, if not low, expectations between Washington and Beijing. Unless a clearer scope and framework arrive by the end of the week, there’s a good chance stock markets will price out even more of the rationale for clawing-back ground since late October, regardless of last-minute assessments of what could be achieved at G20.

Asia, China have most at stake

A normalised chart of dominant stock market regions suggests Asia-Pacific indices have more at stake. MSCI’s emerging APAC and the more closely followed ex-Japan gauges are up 5% to 6% since indices generally bottomed on 29^th October. They’re in close orbit of the most principal hub of all, China, where Shanghai and Shenzhen’s CSI300 is up 3% since the end of October. Europe’s broad STOXX aggregate has barely moved half a percentage point higher in the shadow of Brexit, Italy and rekindled growth worries. The S&P 500 has added 1.5%. Gains by 2018’s laggards in the east based on G20 hopes are coherent, given their position at the leading edge of a dip in the global cycle. With the most to lose for now should China and the U.S. continue a headlong plunge into cold trade war, Asia-Pacific shares could also fall the fastest and hardest on Monday if Tump and Xi agree little at the weekend.

Powell the cheerleader

Till then, investors will continue to track White House and Xinhuamen ‘tape bombs’ (pro- and anti-risk), though loosely, we think. We expect a clearer discount from Fed chair Jerome Powell’s speech (17.00 GMT) and possibly FOMC minutes. Admittedly, some of the charge has been removed from Powell anticipation. This is after vice chair Richard Clarida on Tuesday walked-back some of the rudimentary policy walk-back he (and Dallas Fed president Rob Kaplan) conducted earlier in the month. Their seemingly co-ordinated comments did allow the Fed to informally acknowledge global economic and market moderations. This avoids possible over or under-pricing of such comment in the context of December’s policy statement. If our interpretation is correct, Fed forward guidance will now resume its obdurate optimism on the U.S. economy, until that stance is unsustainable. Appropriately, Powell has been the preeminent cheerleader of that perspective. Whether he will continue to shake those pom poms as much is thereby the main signal to watch for when he speaks later. Chances that the Fed minutes would bring anything like a revelation were always low and look even lower now. More so, after the second look at Q3 GDP, out a while ago, printed in line with forecasts at 3.5%.

U.S. GDP passes without incident

The one tenth of a percentage point shortfall relative to expectations in quarterly core PCE at 1.5% growth was also shrugged off. The dollar index remains comfortably back above its key trend line since September after an 8-session break. True, the rising trend no longer looks as robust. But any euro and sterling updraft are still put into perspective whilst the dollar is top side of the last quarterly trend of the year. With the BoE’s financial stability report later, sterling looks most prone to downward pressure. It would be a surprise if the Bank’s separate Brexit impact assessment held anything new at this stage. But sterling may not require much inducement to swing, given high-octane volatility conditions. A dearth of key dates before the ‘meaningful vote’ in mid-December also leaves the pound prone to yet more ‘headline risk’, till Monday’s PMI releases.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.