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Morning Update
Asian equity markets were weighed down by soggy data from China, as the world’s second-largest economy and many other key Asian nations returned from a long holiday break, commonly known as Chinese new year.
The Caixin Market PMI services data came in at 51.4, which was the slowest pace of expansion in over 5-months. This is important because China is trying to transfer into a service-related economy, as well as a manufacturing powerhouse.
Reports suggest the resurgence of Covid-19 in several regions such as Xi’an and Beijing forced local governments to tighten epidemic control measures, which restricted production, transportation, and sales of goods.
It has become more evident that China’s economy is straining under the triple pressures of contracting demand, supply shocks and weakening expectation. Attention is also on the Beijing Winter games today.
The MSCI’s index of Asia-Pacific shares outside Japan fell 0.20% intraday, while Japan’s Nikkei 225 declines 0.80% heading into Monday’s European session. Australia’s ASX 200 print mild intraday losses as traders factor in the softer China Caixin Services PMI
Adding to the mixed concerns are fears of the Russia-Ukraine border tension and the mixed Non-farm payrolls job report last Friday. The US 10-year Treasury yields are moving away from a two-year high while the S&P 500 Futures flatline.
The US dollar index is attempting to recover after last week’s big sell-off. It must be said that given the magnitude of last week’s decline in the buck, this recovery is very tentative as the greenback suffered its heaviest loss since Nov 2020.
Given the full market’s mood, we are likely to see US dollar traders focus on Thursday’s US inflation data, which could be a make or event from the US dollar index and all the major currencies in the US dollar index basket.
Outside of the US dollar, gold is hanging tough above the $1,810 support level at the time of writing, while silver is having a better session after last week’s scary drop towards the worst levels of the year so far.
Bitcoin is on course for its biggest 7-day gain since the summer of last year. BTCUSD is testing $43,000, with no meaningful resistance above this level until the $44,000 and $47,000 resistance zones.
