CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.

Markets brace for more noise next week

The recent risk rally ran out of steam, and rightly so.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
Federal reserve building
Source: Bloomberg

From a fundamental perspective, there was no significant improvement in the global growth outlook to justify the risk appetite. Even if the majority of S&P firms who have reported their quarterly results have exceeded (low) estimates, still it does not make much sense.

Singaporeans are extremely fond of acronyms, and local traders are probably aware of commonly used acronyms such as FANG (Facebook, Amazon, Netflix and Google) and FOMO (Fear of Missing Out). Now we have TIME (Tech, Industrials, Materials and Energy) added to the list, which could suggest that there is lack of clear investment themes.

The problem is more poignant amid an increasing uncertain investment environment. In the absence of market clarity, investors will grasp at any market developments and economic data to ascertain trends. The chase for yields, given extremely low or negative bond returns, may also push money managers into stocks.

Next week will bring quite a number of catalysts for traders. Not only do we have a barrage of economic data, we also have two key central bank meetings, the Federal Open Market Committee (FOMC), and the Bank of Japan (BOJ).

Although the European Central Bank (ECB) left policy unchanged yesterday, President Mario Draghi stressed that they would not hesitate to roll out further easing measures if necessary. He urged stakeholders to be more patient, and give current measures more time to take effect.

In particular, he asserted that criticism of ECB’s recent policies is not helpful, and may make it harder for the Bank to meet their goals. Nonetheless, the ECB may sit on the side-lines for a while as they assess the impact of the strong measures announced in March, where some are only effective from June, before deciding on the next course of action.

Meanwhile, the Federal Reserve is in a dilemma as they seek to skip a rate hike while simultaneously avoiding giving the impression that the rate hike cycle is going to be on hold for many more months. However, they will also be careful not to commit to any timeline. You should remember that the April FOMC meeting will not be accompanied by a press conference, which means that any communications will be confined to a short policy statement.

The BOJ will make their policy decision after the Federal Reserve. The recent batch of weak data in Japan increased the possibility of more stimulus from BOJ. Moreover, any signs that the Fed is reluctance to lift rates would lift the value of the Japanese yen against the US dollar. A stronger yen hurts Japanese exporters and depresses import prices, which would make it more difficult to hit the inflation target.

While BOJ governor Kuroda has expressed his willingness for more easing measures, he has avoided giving a clear signal that any action is forthcoming. There is the potential of a policy surprise, but let’s not hold our breath.

Central banks aside, the market would be bombarded with economic data, which should help them to gauge the health of major economies. In conjunction with the FOMC, it is important to keep an eye on US data, where new home sales, durable goods orders, consumer confidence and employment cost index are on the tap. More importantly, the advance release of Q1 GDP will scrutinised.

Japan will have a data-heavy week, with inflation, retail sales, industrial production, and employment figures slated for release. Meanwhile, only industrial profits data in China is noteworthy. For Singapore, analysts will monitor inflation data, industrial output and jobless rate.


*You may wish to follow me on twitter at

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.  Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. 

CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.