29 November 2018
ASEAN morning bytes

General market tone: Risk-on.

Risk sentiment is seen to dominate Thursday with Powell turning dovish overnight.  Traders will look to Fed minutes tonight and the G20 meeting on Friday for further direction

International theme: Powell walks back previous comments, turns dovish to push risk on sentiment

  • Fed Chair Powell made an about-face overnight, turning dovish just weeks after indicating the Fed had some ground to cover before approaching the neutral rate. Powell’s dovish comments sparked risk on sentiment which could continue on Thursday although the G20 meeting and Fed minutes still loom on Friday.
Indonesia and Philippines FX forecasts revised on better sentiment, hawkish policy

Sentiment towards emerging markets has improved substantially in recent weeks. But central banks in Indonesia and the Philippines are likely to remain hawkish to prevent their currencies from depreciating too much next year

Improved global scene: A phone call, the neutral rate and the oil slick

Concerns about the US-China trade war have subsided somewhat after President Trump said earlier this month that he'd had a "good conversation" about trade with China’s Xi Jinping and discussions are "moving along nicely". Meanwhile, the threat of a hawkish Federal Reserve has faded somewhat with dovish commentary from Fed Vice Chair Richard Clarida and lacklustre economic data suggesting that the global economy is slowing. Oil never threatened to hit $100/barrel and is now down 7.98% with Dubai crude trading at $58.74/barrel as the US sanctions on Iran were somewhat nullified after eight US allies were granted a six-month waiver to continue importing oil from Tehran. Sentiment towards emerging market currencies has improved dramatically since November.    

Reading time around one minute

Good MornING Asia - 29 November 2018

Suddenly all seems to be good for risky assets despite an increasingly dovish tone on the global growth outlook in 2019. The most lingering questions are: will the Fed really pause tightening, the UK stay in the EU, and oil price hold on to its current low level?     

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