Asian Session Market Wrap
The MSCI Asia Pacific index rose by 0.4% after nearly entering a bull market on Monday. Hong Kong stocks went up by 1.3%, with Contemporary Amperex Technology surging up to 18% on its first trading day.
Markets shrugged off a Moody’s downgrade with risk assets largely continuing their rally. There was some caution on show as safe havens like gold did gain a bid yesterday.
US-China Trade Deal Optimism
Optimism from the US-China 90-day pause may be waning at the moment with market participants looking toward other trade deal announcements to boost sentiment.
Market participants are closely watching US trade talks with India and Japan after a recent tariff-lowering deal with China raised hopes.
Trade Deal Developments
- India is working on a three-part trade deal with the US and aims to finalize an interim agreement before July, when Trump’s reciprocal tariffs are set to start, according to insiders.
- Japan’s top trade negotiator, Ryosei Akazawa, is planning a third round of talks in the US as early as this week.
- Japan’s finance minister is also arranging a meeting with US Treasury Secretary Scott Bessent this week to discuss issues like currency, which boosted the yen.
- Vietnam and the US began their second round of talks on a bilateral tariff agreement in Washington DC on Monday, with discussions continuing until Thursday.
Following on from yesterday’s Chinese data, major Chinese banks cut deposit rates again, in the latest efforts to drive consumers to spend more amid a flagging economy. This was evident by the retail sales numbers yesterday.
Developments and announcements on these trade deals could help boost market sentiment and potentially stir another bullish rally in risk assets.
The European Open
Heading into the European open, gold dropped 0.2%, indicating a six-day advance may be poised to end. Contracts for Europe strengthened 0.5%
The pan-European Stoxx 600 index rose 0.2%, reaching its highest level in seven weeks. The DAX printed fresh all-time highs and peaked just above the 24000 handle but trades slightly down on the day.
Utility stocks went up by 1.1%, with Portugal’s EDP Renovaveis gaining 3.5% after Deutsche Bank upgraded its rating from “hold” to “buy.”
FX Market Movements
On the FX front, the yen stayed steady at 144.75/yen, after hitting 144.66 on Monday, its weakest level since May 8. The euro dropped 0.1%, following a 0.6% decline in the previous session.
The Australian dollar fell 0.5% to 0.6423, giving up part of Monday’s 0.8% gain. This came after the Reserve Bank of Australia (RBA) lowered its main cash rate to 3.85%, a two-year low, due to a weaker global outlook and slowing inflation at home.
The pound remained steady at 1.3353, while the euro stayed flat at 1.1249.
Currency Power Balance
Source: OANDA Labs
Economic Data Releases
Looking at the economic calendar, it is a quiet one in Europe with a few ECB policymakers being the highlight. Later in the day we have Canadian economic data and a few Federal Reserve policymakers which could stoke volatility as well.
For now, news and comments on potential trade deals as well as any new information on the Russia-Ukraine truce could have an impact on market moves.
Chart of the Day – DAX
From a technical standpoint, the DAX index has printed a fresh all-time high just above the 24000 handle.
In early European trade, the index is trading slightly down on the day and this could be due to some caution and potential profit-taking.
The daily candle did close above the 24000 handle and could help push the Index higher.
However, looking at recent price action and the last time the index printed a fresh all-time high we did see about three days of consolidation before the next push to the upside. Will history repeat itself?
The period-14 RSI remains in overbought territory with immediate support resting at 23750 before the 23471 handle comes back into focus.
A move beyond 24000 and I will be paying attention to whole numbers at 24250 and 24500 respectively.
DAX Index Daily Chart, May 20, 2025
Source: TradingView.com
Analysis
This comprehensive market wrap-up provides insights into the recent movements in the Asian and European markets, highlighting key developments in trade deals and economic data releases. Here’s a breakdown of the key points:
- The MSCI Asia Pacific index rose by 0.4%, with Hong Kong stocks surging by 1.3%.
- Market participants are closely monitoring US trade talks with India and Japan, as well as ongoing negotiations with China.
- Major Chinese banks cut deposit rates to stimulate consumer spending amid economic challenges.
- The European markets saw a mixed performance, with the DAX index hitting fresh all-time highs.
- Currency movements showed stability in the yen, declines in the euro, and Australian dollar, and a steady pound.
- Technical analysis of the DAX index suggests potential for further upside but with caution due to overbought conditions.
Overall, these market movements reflect the ongoing impact of trade negotiations and economic data on global markets, emphasizing the interconnected nature of the financial world and the importance of staying informed for making sound investment decisions.