29-OCT-2018, MONDAY

1) Asia Stocks Mixed As Global Politics Eyed
2) Crude Oil Price Chart Hints at Major Bearish Trend Reversal
3) AUD May Fall with Nikkei, Euro at Risk

1) Asia Stocks Mixed As Global Politics Eyed

Asia Pacific stock markets put in a mixed performance to the start the week, with Chinese mainboards under pressure still even as indexes elsewhere rose. October is looking set to be a month of heavy falls for equity around the world though as worries linked to both global trade and rising US interest rates take a toll, especially on emerging market assets. Wall Street is looking at its worst month since the end of the financial crisis, s state of play which will probably keep a lid on any regional enthusiasm. However, some buyers clearly thought that the Nikkei 225, ASX 200 and Kospi were at a level worth buying on Monday.

The Nikkei added 0.4% and the ASX just over 1%. However, Shanghai and Hong Kong were lower, by 1.5 and 0.1%, respectively, paring earlier gains in the case of the Hang Seng. News that HSBC bank’s profits had risen by 28% in the third quarter slightly missed expectations and probably won’t lift some of the question marks investors have over the giant lender. Its shares have fallen 20% or so this year. Australia’s ASX 200 printed new 2018 lows last week and, while it is holding on above them for the moment, seems unlikely to re-climb its previous significant high anytime soon.

2) Crude Oil Price Chart Hints at Major Bearish Trend Reversal

Crude Oil prices recovered some lost ground as a pullback in the US Dollar offered de-facto support to assets priced in terms of the benchmark currency on global markets. Gold prices struggled to make good on the Greenback’s retracement however, retreating from intraday highs as recovering risk appetite in the last hours of the trading week buoyed Treasury bond yields alongside stocks.

Looking ahead, sentiment trends are likely to remain in focus. The WTO will consider whether to take up a US complaint against China, which it says has violated the international body’s intellectual property rules. If an investigation follows, that may be seen as aggravating the on-going trade war, souring risk appetite and pressuring on oil prices.

An upside surprise on the Fed’s favored US PCE inflation gauge may compound risk-off dynamics and punish gold amid worries about accelerated tightening. Core price growth is expected to print at 2 percent on-year in September, unchanged from the prior month. PMI survey data suggests a dramatic pickup in cost burdens linked to tariff hikes and higher borrowing costs however.

Crude oil prices rose to retest support-turned-resistance set from early February but the near-term down move remains intact. A push above 68.81 opens the door for a retest of the 70.05-26 area. Alternatively, a reversal back below the October 23 low at 65.77 targets the 64.26-45 region. Turning to longer-term positioning, a major top appears to be in place as expected. A double top marked by the appearance of two bearish Evening Star candlestick patterns on the weekly chart has been confirmed with a break of the uptrend set from June 2017. The next layer of substantive support is in the 63.62-64.45 zone.

3) AUD May Fall with Nikkei, Euro at Risk

The anti-risk Japanese Yen gained versus its major counterparts Friday. Broad declines in Asia Pacific benchmark indexes amidst a lack of prominent event risk saw markets default to a risk averse mood. This preceded a gap lower in the S&P 500 which despite a temporary climb, still finished the day lower as gains were trimmed. Looking to its record high in September, the S&P 500 stopped short of corrective territory. US third quarter GDP data, which saw some mixed results, failed to spark a meaningful reaction in the US Dollar which pared some of its gains as Wall Street temporarily climbed. The passing of event risk may have led to some corrective performance in stocks as we approached the weekend. This allowed the pro-risk Australian and New Zealand Dollars to trim some of their losses.

As we begin the new week, the Euro could be vulnerable when local markets have a chance to respond to Italy’s outlook being downgraded by S&P to negative from stable. Budget clashes between Italy’s anti-establishment parties and the European Union threaten the nation’s credit rating. The announcement crossed the wires long after EU banks closed for the end of the week.