ASIA MORNING: ASX Gives Thanks To Supportive Fundamentals

*ASX on course for new all-time highs
*US-China, rates and liquidity fundamentals to sustain price action
*China PMI the forgotten concern up ahead

ASX bucks the trend

Due to Thanksgiving celebrations, it was a quiet session overnight for US and European equities which finished broadly lower. S&P 500 retraced early losses to finish only -0.11% down. DAX also clawed back an early drop and closed lower -0.19%. ASX 200, however, withstood the wider sell-off and championed the performance table across G10 equity benchmarks. Judging by December Futures price action, it looks set for a moderate gain at the open to tune of 28pts. This would see the cash index up around 6,892 - a meaningful break of yesterday's brush of the summit. Multi-year trend resistance suggests the next technical upside target is 7,000.

Supportive fundamentals to end the week

In my view, I see a couple of fundamental factors helping to keep price action afloat in trading today. 1) Markets see lower participation and therefore probably capped negative moves from extended US holidays. 2)  A perceived reticence from China to take any drastic actions against the signed HK bill, for the time being, keeps US-China trade uncertainty in check with medium-term downside risk. And importantly, 3) off the back of Lowe's QE speech which strengthened bets for two more rate cuts before June 2020, there's relative RBA dovishness against G10 majors. This means Aussie capital which hunts for yield drives flows into the ASX 200 as yield differentials between stocks and bonds widen. We're also seeing capital outflows from Europe, a known funding currency, face little resistance into the Aussie investment space. 

Source: Eikon 

Daily close. EURAUD inverted (RHS, orange). ASX 200 (LHS, purple). As Aussie dollar strengthens, there's impetus in ASX 200 to move higher. This close correlation seems to exhibit itself in the prior 5 months. 

But not out of the woods yet

Although there won't be an immediate reaction from China manufacturing PMI due for release on Saturday at 12pm AEDT, we think it demands attention. Consensus has come in at 49.5, a slight improvement on 49.3 seen in the prior month. A weak print here potentially builds on poor October activity data and could partially scupper the soft-landing narrative, thereby priming the market for a negative market reaction come early Monday. 

Elsewhere on the calendar, Canadian September m/m GDP figures are set to print early Saturday at 12.30am AEDT. This should feed into late USDCAD price action with the prior two releases garnering a modest bid after printing below expectations. We look to retain near-term upside bias in USDCAD into 1.332.

Lastly, USDKRW also catches a rate decision from the Bank of Korea (BoK) at 12pm AEDT. Consensus is for a hold. Though could be some upside risk to the pair on more dovish language.