US stocks continue their bullish ascent. Asian markets show mixed performance amid China data and new trade deal risks. The Sterling pound and Aussie dollar weaken.
Mixed performances in US stock indices, Gold dipped, Nikkei 225 stabilized at support
The US stock market performed stellarly overnight. The S&P 500 rallied by 0.5% to hit a fresh all-time closing high of 6,227. The small-cap Russell 2000 outperformed and advanced by 1.31%, clearing above its key 200-day moving average for the second consecutive session.
Overall, this is a positive sign for the US stock market, as the post-"Liberation Day" recovery since April has broadened beyond mega-cap technology stocks to include a broader range of market segments.
In contrast, Asia Pacific stock markets have a lacklustre intraday performance today at this time of writing, where Hong Kong’s Hang Seng Index erased Wednesday’s gains and dropped by -1% and a larger loss of -1.4% on the Hang Seng China Enterprises Index due to a weak reading of the private sector compiled by China Caixin Services PMI, which indicated that growth in services activities slowed to 50.6 in June, a 9-month low from May’s 51.1 and below market consensus of 51.0.
In addition, a trade deal between the US and Vietnam that US President Trump proclaimed as “being secured” in his social media post includes a 40% levy on goods deemed to be transhipped through Vietnam, a measure likely to indirectly target China, which has used other countries to skirt US import tariffs.
Hence, the latest US-Vietnam trade deal may provoke China and kick-start another round of tit-for-tat retaliation measures, triggering a negative feedback loop into Asian equities if such a scenario materialises.
The sterling pound was the worst-performing major currency against the US dollar on Wednesday, dropping by 0.8% due to internal political factors. Other major currencies remained firm against the US dollar, but the US Dollar Index only saw a marginal gain of 0.13% yesterday.
The sell-off in the pound was driven by growing concerns over the UK’s public finances after Prime Minister Starmer declined to confirm whether Chancellor Reeves would remain in her role after the next general election. Her potential replacement may be less committed to the government’s self-imposed fiscal rules, raising fears of increased borrowing and a widening budget deficit.
In today’s Asia session, the pound extended its loss marginally by -0.04% to 1.3628 against the US dollar. The worst performer has been the high beta Aussie dollar, where it shed -0.3% against the US dollar due to the weak China Caixin Service PMI print and the risk of China’s retaliation measures towards the US over the 40% levy on transhipped Vietnamese goods in the US-Vietnam trade deal.
Gold (XAU/USD) has continued to trade in a range between its 20-day and 50-day moving averages at US$3,360 and US$3,318, respectively, as the market participants await key US economic data due later today; non-farm payrolls and ISM Services PMI.
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