The past week has seen tepid movements across markets. Notably, week-to-date changes in the US markets, such as the Dow Jones and the S&P 500 index were close to a standstill, providing little inspiration for global markets. Key sectors balancing the changes had been the energy sector on the slide and the healthcare and IT sectors acting as supports.
This phenomenon had transcended into Asia, contributing to mixed returns across the region. Specifically, the local Singapore market, which experiences a strong influence from oil movements, had been on the losing end. The index slipped close to 0.7% when last checked at 3pm Singapore time. On the flipside, tech heavy bourses remain favored even as their currencies were sold.
While US indices kept to broad consolidation movements, sectoral changes remain underway. The fresh week brings the second part of the Federal Reserves’ stress test for banks, which is expected to be a key event for the equity market. The passing of the first round by major US banks had yielded little reaction from financial stocks. However, the second round could be markedly different with cash payouts expected conditional upon positive results. This could translate to a boost for bank stocks and investors in the financial sector are expected to closely scrutinize this announcement.
In addition to the abovementioned, the dynamics between energy stocks and the healthcare and IT stocks are likely to remain on investors’ radar. Crude oil prices appear to be undiscerning with regards to US inventories performances lately, falling even as the drop in inventories overshot market expectations. WTI futures had slipped past the key $43.43 per barrel support and further downsides would be something for the market to concern themselves with in the current bearish environment for crude.
China PMI in focus
A light start to Asian markets is expected with several South-east Asian economies, including the local Singapore market, away on holiday. The attention on Asian markets may heighten into the end of the week as China and Japan economies report PMI and CPI numbers respectively. Other notable release includes trade updates from Hong Kong and New Zealand in the Asia-pacific region. Retail sales updates from Japan and Hong Kong will also be due on Thursday.
Official and private manufacturing PMI numbers had deviated in the previous release. While official manufacturing PMI remain unchanged at 51.2, the private Caixin gauge recorded the first contractionary figure in close to a year. Serving as a bell weather for Asia’s manufacturing sector, the market is expected to be highly watched for the week ahead in addition to the industrial profits data. The Caixin PMI will be released on 3 July to provide a fuller picture.
Lastly, Japan’s May inflation rates will be reported on Friday and the market is currently expecting a slight acceleration in Japan’s consumer prices. This could provide a mild boost for the rather range-bound USD/JPY. Nevertheless the staggering distance from the Bank of Japan’s (BoJ) target is expected to still contain the central bank towards the accommodative end for monetary policy. Unemployment data, expected on Friday as well, could remain at the 23-year low of 2.8%.