By Stephen Innes
Month-end flow, combined with Midterm elections uncertainty, was more than enough to keep investors busy, and there were enough head fakes from the Trump camp regarding progress on a trade deal with China to keep political uncertainty boiling. While the equity market and risk sentiment stabilise around current levels and some of the worst-case scenarios around trade war hedges unwind, overall risk sentiment has failed to pick up.
Investors are far too wary of an empty promise, but ultimately, they will need to decide how much of President Trump's olive branch to China was a ploy to boost equity markets ahead of the US mid-term elections on Tuesday, and how much of it is a bona fide attempt to reach an agreement.
Speaking of unwinding of worst-case scenario bets, USDCNH posted a bearish outside week after fast money ran for the exit, as a push above seven would be less likely ahead of November G-20. If US-China negotiation channels remain open, an escalation on the US tariff front remains less likely, so China will be more incentivised to keep yuan weakness in check. Nonetheless, the rally in the RMB complex also helped other Asian currencies which had their best week since late January.
Local Investor sentiment will remain nervous after local stock markets rallied hard on Friday, only to see fund managers selling US stocks on the numerous Trump trade headline twists and turns.
The Malaysian Ringgit
Although the government forecast a deficit of 3.7% for its 2018 budget, up from earlier forecasts of 2.8%, the ringgit gained on Friday due to a stronger yuan, but investors were also cheering when the Government announced it was doubling its Dividend from Petronas.
Main focus today
PMI numbers will be released for Singapore, Hong Kong and the Philippines. The market's attention will be on the Caixin China PMI numbers where a negative number will raise more hopes for stimulus.
Malaysia will report trade figures while Indonesian GDP will also be published.
Chinese President Xi will be addressing the first international import forum in Shanghai.