Market Brief: Nikkei 225 and Hang Seng Trade Lower as US-China Trade Deal Fails to Impress
After months of waiting, the US finally made an official announcement that a phase one deal has been agreed with China. It has been much-anticipated by market participants. However, Asian equities markets seemed unimpressed by the news given their performance in today’s trading.
The Nikkei 225 closed lower today by 70.8 points or 0.29% at 23,952.4. The Hang Seng index is also down close to around 100 points or 0.35% at 27,589.2. Meanwhile, risk currencies like NZDUSD is slightly down by 3 pips, trading just below the 0.6600 handle. AUDUSD is also lower by about 8 pips at 0.6874.
US-China Trade Deal
On Friday, it was announced that the US would roll back its existing tariffs on Chinese goods. More importantly, the additional levies which were scheduled to be implement on December 15, were cancelled. China has supposedly agreed to purchase US goods for the tariffs to be lifted. It has been said that the Asian economic giant would buy at least 200 billion USD-worth of manufactured, energy, and agricultural products until 2021.
The lack of response from Chinese policymakers may have raised some skepticism about the deal. Details have also been scarce since the announcement. These may have spooked some investors out of today’s Asian equities.
Chinese Data Reflect Economic Resilience
Data from China came in better than expected today. Industrial production in November grew by 6.2% compared to a year ago. This was higher than both the 5.1% forecast and it’s reading for October at 4.7%. Consumer spending in China also topped forecasts. On a yearly basis, retail sales in November posted an 8.0% growth rate. The forecast was only for a 7.6% uptick to follow the 7.2% reading for October.
Meanwhile, fixed asset investment and the unemployment rate both came in as expected at 5.2% and 5.1%, respectively.
On the 4-hour time frame, we can see that NZDUSD has been trading higher. This becomes apparent when you connect the higher lows from November 29 to December 11. When you draw the Fibonacci retracement tool from the low of December 11 to the high of December 13, we can see that the currency pair has pulled back some of its gains from last week. The currency pair has found support in the area between the 38.2% Fib and the 50% Fib level. This area is also near the rising trend line. If support around 0.6575 does not hold, we could see NZDUSD track lower to test support around the 100 SMA which is at the 0.6500 psychological handle.
On the other hand, if the currency pair finds enough bids on the trend line, NZDUSD could test last week’s highs at 0.6635.