Asian stocks cheer mild risk-on despite trade/political uncertainty

• MSCI’s Asia Index (ex-Japan) snaps two days of losses, Japan’s NIKKEI ignores lesser than forecast activity gauge.
• Trade/political pessimism concerning China, Iran and Brexit remain in play.
• Few more PMIs, Lagarde’s speech and Fed speak are in the spotlight.

Despite lingering uncertainties surrounding the US-China trade talks, Brexit and the geopolitical tension emanating from Iran, Asian stocks manage to buck the previous downtrend.

Better than earlier figures of China’s Caixin Services purchasing managers’ index (PMI), followed by upbeat Manufacturing PMI published on Tuesday, seems to take the positive side for Asian shares while challenges due to the weak activity numbers from Hong Kong and Japan were largely ignored.

Australia’s gross domestic product for the second quarter (Q2) of 2019 favored mixed feelings as it matched upbeat forecast on QoQ basis with 0.5% mark while also declining to 1.4% consensus versus 1.8% yearly growth. Further to note, the United Kingdom’s (UK) lawmakers voted in favor of a bill to push the Brexit deadline beyond October 31 and seek controls of the talks with the EU. However, the UK Prime Minister (PM) Boris Johnson has already announced readiness to call a snap election in early October if the government loses Brexit power.

Adding to the geopolitical tension are the fresh sanctions on Iran from the US, followed by the Arab nation’s readiness to step further away from the Nuclear Deal if the EU refrain from $15 billion credit line.

As a result, MSCI’s index of Asia-Pacific shares ex-Japan refrains from previous two days’ decline with close to 0.7% of gains while Japan’s NIKKEI offers 0.10% positive mark by the press time of pre-European session on Wednesday. It should also be noted S&P 500 futures also lure buyers while the US 10-yer treasury yields are mildly positive to 1.475%.

Investors will now focus on some more PMI numbers from the EU and the UK while also taking clues from the European Central Bank’s (ECB) nominated President Christine Lagarde and comments from Fed policymakers including Federal Reserve Bank of St. Louis President James Bullard and Federal Reserve Bank of Chicago President Charles Evans.