For equity markets, the earnings results chase is only expected to heighten in the week ahead.
Week recap
Week-to-date declines for the US dollar index had certainly been against most market expectations at the start of the week, though the reaction towards Friday’s CPI release remains to be seen. For equity markets, it had been a week of consolidation after stock indices in the US retraced prior gains on concerns over details from Q3 earnings reports. Asian markets meanwhile charged ahead with gains having flowed in as the Chinese and South Korea market played catch-up post holidays, while the dovish perception towards the Fed also enlivened stock prices in this part of the world.
Earnings chase
With approximately 11% of the companies on the S&P 500 index due to report their Q3 earnings in the coming week, the scrutiny upon the results is only expected to heighten. In addition to financial names such as Morgan Stanley and Goldman Sachs Group, Netflix Inc. of amongst the FANGs will also update their Q3 performances. On the Dow, heavyweights such as IBM Corp. and Johnson & Johnson will also ones to watch. Besides gleaning inspirations from US markets, Asia would see a trickle of its own names including ICBC Ltd. on the HSI and a slew for the local Singapore market.
Separately, the debate over the US dollar trajectory is expected to sustain after the Federal Open Market Committee (FOMC) minutes threw a spanner in the works for the USD recovery this week. Dovish perception towards the latest Fed minutes opens up room for further evaluation of the Fed’s position on future rate hikes. In the coming week, industrial production and housing data in the US would be things to watch, coupled with two appearances by Fed chair Yellen. The nomination of the next Fed chair by President Trump is another key item on the radar, though delays into the month’s end should not be ruled out as suggested by Treasury Secretary Steven Mnuchin.
China focus
External leads aside, Asian markets would find the primary focus on Asia’s giant, China, with the 19th National Party Congress set to commence on Wednesday, 18 October. The market will be holding out for the economic and political changes out of this meeting which will shape the economy’s direction for the next five years. Asian markets may very well trade to the tune of the policies rolled out from this meeting, in addition to the set of data due in the week. This will include inflation releases at the start of the week and China’s Q3 GDP, industrial production and also fixed asset investments on Thursday. Resilient data out of China thus far has contributed to expectations for sustained strong growth at a median consensus of 6.8% YoY for Q3.
For the local Singapore market, after a set of outperforming Q3 GDP figures, the market may not find resilient numbers out of next Tuesday’s September’s non-oil domestic export update a surprise. This could elevate the influence of external leads upon the Straits Times Index, barring significant movements from earnings reports on the index. Do note that onshore markets in Singapore and Malaysia will be closed on Wednesday for a market holiday and Thursday for India.
Besides the abovementioned, central banks in South Korea and Indonesia will also be convening on monetary policy ahead of Japan’s general election on Sunday, 22 October, though surprises are not expected here.
