Financial market research and analysis

Asia traded in a risk-off environment as the Chinese consumer inflation dropped to 1.3% year-on-year in August from 1.8% previously.

This is the eight consecutive month drop in Chinese consumer prices. Today, the Chinese inflation stands at four-year lows, as a sign that the People’s Bank of China (PBoC)’s monetary support has not been sufficient to boost the appetite in China’s domestic market. Combined to a 5.4% year-on-year drop in August imports, the recent data suggested that the slowdown in China has stabilized; yet it is too early to talk about a pick-up on the end-consumer based activity.

The world is worried about the economic slowdown in China. In turn, Chinese consumers are worried about the economic stagnation in the global economy, according to a recent poll.

In Japan, the negative sentiment was reflected in a stronger yen. The yen lead gains in Tokyo. Nikkei turned flat (+0.04%) after a negative morning session, while Hang Seng gained 1.04% on speculations that the PBoC would add more stimuli to boost the economic activity in China.

All in all, the data offered nothing appetizing for the Friday session.

Traders found no interest in pushing the AUDUSD above 0.7655 in Sydney. The pair is testing the weekly ascending trend-line base, 0.7645, which should distinguish between a further sell-off toward 0.7615 (major 50% retrace on Sep 1st – Sep 8th rise) before the 200-hour moving average, 0.7595, and a recovery toward 0.7730/0.7750 area.

The limited appetite also weighed on the energy market. WTI and Brent crude retreated by 1.01% and 1.08% after having rallied yesterday on news that the US inventories recorded the steepest drop since 1999. Commodities softened.

FTSE opened downbeat. All sectors began the day in the red, except for utility stocks (+0.20%), building a favourable basis for a defensive market environment throughout the day.

And finally in the US, the Federal Reserve is putting pressure to ban Wall Street’s banks and institutions investing in companies. The Dow is expected 30 points lower at the US open; the S&P 500 is expected to drop 2 points with the opening bell.