ASIA MORNING: US-China Back In The Spotlight

*US-China trade talks lean positive
*ASX 200 remains bid on RBA Oct expectations
*Oil edges higher on supply stories

With Central Banks out of the way, US-China trade draws focus

US and China trade representatives have come back to the negotiating table in a bid to determine whether both countries will be able to agree to a deal come major talks in early October. A key focus for the discussions will be around US agriculture and how much China are willing to buy, if any at all, as Trump looks to build favour amongst the US farmer electorate with November elections nearing. 

How big an impact Trump's recent symbolic gesture of goodwill in delaying a 5% tariff hike due October 1 will have on softening China's stance is yet to be seen, though Reuters have noted some members of the Chinese delegate will remain behind to visit US farming productions.

Lingering impasses could still remain at large, however, with China having repeatedly said that it won't commit to large agricultural purchases without first having US tariffs taken off. In July, Trump was under the impression that China had committed to large scale purchases, and so, when they failed to materialise - it led to the imposition of another 10% hike in tariffs. 

The rhetoric coming out of both camps at time of writing appear fairly positive, though I'm always sceptical. I think if we see some news around the potential structure of an interim deal, markets would jump on risk assets quite quickly. For both parties to agree to a comprehensive trade deal is unlikely, but a hardened verbal commitment by China to purchase US farming products should work to reprieve trade war risks.

Even a further delay of 5% tariffs due Oct-15 on US$250bn worth of goods would go far, especially given China will be celebrating its Mid-Autumn Festival and National Day in earlier October. 

I'd expect USDCNH to be fairly settled today with discussions ongoing. The positive lean in headlines could help CSI300 push higher above 3,920-25 resistance (neckline for a Sep 5-17 head and shoulders formation). 
 

ASX should to stay afloat 6,700 on a light Friday 

With not much news on the horizon and Super Thursday's multitude of central bank decisions out of the way, I'd expect yesterday's ASX's breach of 6,700 to remain bid across early Asia. ASX Sep Futures expired last night with December Futures now the main volume product, trading at 6,721.

The likelihood of a 25bps rate cut come RBA's October meeting increased substantially following an overall weakish employment picture. This should, again, bode well for today's price action across weaker balance sheet Aussie equities with less liquidity and credit risk priced in. Given other major Central Banks also held yesterday - market participants are more inclined to bid for risk assets with bond yields turned lower. 
 

Resistance levels to the topside to look out for: 6,770 (July 5 and Aug 5 highs). 
 

ASX 200. Source: Trade Interceptor