CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Asia market week ahead - US CPI, China trade and US-China talks

The passage of the Fed meeting this week places the focus back squarely on data. This also follows a week seeing Wall Street chalk up record highs as one ponders over the sustainability of the rally.

US inflation conundrum

While we have yet to see April’s labour market update in the US at the point of writing, the week ahead will pack more data releases from the US for markets to watch with attention on April’s CPI update.

The US market had led global equity markets with a good run thus far, underpinned by the better-than-expected corporate earnings showings, Fed’s support and positive sentiment over geopolitics. This week, however, did find sentiment altering slightly with regards to monetary policy. In particular, the Fed maintained their neutral stance as Fed chair Jerome Powell sparked some hawkish interpretations with his ‘transitory’ remark on the lack of inflation. This had invited the market to pare back expectations for easing prior to the end of the year.

While the Fed’s preferred core PCE reading did turn up rather flat in their latest March showing, April’s core CPI update which is due in the coming week is expected to accelerate in the month. The current consensus points to a reading of 0.2% month-on-month (MoM) from 0.1% previously, sending the year-on-year reading past 2.0%. Headline inflation is due to remain steady in MoM terms at 0.4%, which is perhaps of little surprise given the price growth expected on the ends of both food and energy. This bias may in turn see to the uptrend for the US dollar index continuing in the coming week. As said in our daily note, to some extent, expectations for wage inflation to pick up among the labour market updates into the end of the week can already been seen contributing to bringing in the bids for the USD, one to watch.

The CPI will be the key piece of information while March’s trade data and a series of Fed speakers including Fed chair Powell will also be due in the week to watch.

US-China trade talks

Over and above economic data, with the blowing over of the main bulk of corporate earnings in the US, it would return much of the market’s attention towards geopolitics in the coming week. Approximately 10% of the companies on the S&P 500 index are due to report earnings in the coming week after seeing approximately three quarters of the company dish a 76% beat in terms of earnings.

The had been a build-up of the anticipation for the upcoming US-China trade talks this week with reports that a US-China trade deal could be established as early as the coming week where China vice-premier Liu He is expected to lead delegates back in Washington for talks. The Trump administration’s acting chief of staff, Mick Mulvaney, was also heard warning that the US could leave the negotiation table if a trade deal is not achieved in the coming weeks. Whether this is positioning, it may be difficult to tell in the final stages of talks, but has certainly set the stake up for risk sentiment in the coming week for global equity markets. While the market had largely dismissed the chatters this week, look to whether an announcement would come through next week which are also the last of planned talks thus far.

Chinese data watch

Plenty of Asia indicators would be expected in the coming week for regional trade with none other than China’s trade data being the key highlight. The Chinese market may have reacted positively to the weak showing in April’s manufacturing PMIs this week on account of hopes for continued government stimulus. There is, however, little doubt that the earliest of April’s figures has reflected some weakness for the Chinese economy. Low expectations had been pencilled in for exports growth in April at 2.3% YoY currently with any disappointment potentially one to drag on trade next week, one to watch.

Besides the Chinese numbers, a couple of tier-1 data in the form of Q1 GDP will be out across Indonesia and the Philippines. Central bank meetings in Australia, New Zealand, Thailand and the Philippines will also be due across the region with the consensus pointing to a cut only for the last of the lot.

Trailing the US corporate earnings season will also be a series of companies in Asia including OCBC, the last of the trio of local banks, for the Singapore market. Surprises had been seen out of both DBS and UOB as investors await OCBC to fall in line with this interest-income supported outperformance.

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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.

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