Summary:

• Major currencies remain little changed at the end of the Asian session 
• Asian stocks trade mostly higher led by Hang Seng following positive developments from the Korean Peninsula
• Chinese manufacturing and non-manufacturing PMI beat forecast offering a slight support for equities 

The beginning of this week trading has been quite calm despite upbeat developments taking place in North and South Korea at the end of the past week. Let us remind that both leaders pledged to denuclearize of the Korean Peninsula vowing to bring a formal end to the Korean War. While these are decisively promising declarations Fitch has remained skeptic thus far saying in its report that a process of normalising relations is likely to be lengthy and and unpredictable, and the upcoming summit between Kim Jong Un and US President Donald Trump does not eliminate risks associated with military stand-off. Although major currencies have remained quite subdued over the course of recent hours stock markets have been buoyed not just by positive revelations from Asia regarding denuclearization but also by decent earnings from some tech giants such as Microsoft, Intel or Amazon. Being a while before the close stocks in Hong Kong are definitely leading the gains in Asia as they are up 1.65%. The Korean Kospi is gaining 0.7% while the Australian benchmark is picking up 0.6%. Do notice that most of Chinese major indices along with the Japanese Nikkei are closed toady due to a holiday.

Chinese manufacturing and non-manufacturing PMI beat expectations in April. Source: Bloomberg

In terms of macroeconomic releases we were offered overnight Chinese PMIs deserve most of attention. Manufacturing PMI steadied in April showing 51.4 against 51.3 in March whereas services PMI increased to 54.8 from 54.5. It’s worth noting that the results look quite encouraging as both indices managed to stay close to their prior levels despite persistent threats to the trade outlook from a dispute between China and the US as well as a credit clampdown in the second world’s largest economy. Bear in mind these were official PMIs, and private PMI data from Caixin are scheduled for Wednesday and Friday – both are forecast to bring lower levels compared to today’s data. On top of that let’s mention the inflation data from Australia released by the Melbourne Institute (this is a monthly reading). It showed April price growth picked up to 0.5% mom from 0.1% mom last month, but the annual pace decreased to 2% from 2.1% suggesting no upside risks to interest rates in the nearest future. 

The Hang Seng (CHNComp on xStation5) is breaking out of a short-term trend line, and if bulls are able to close the day above this line it could portend more gains further this week. Source: xStation5