US markets meanwhile held in a state of consolidation ahead of the April non-farm payrolls data. The focus ahead will be on the series of economic data following the conclusion of the French election.
Recap of the week
Most markets were closed on Monday for Labour Day holiday while Japan was away in the latter half of the week for golden week holiday. Amid a week of disappointment in China’s purchasing managers’ index, the market found solace in US earnings and trudged on. A cautious stance had however been seen sighted ahead of Friday’s US NFP data with investors taking some money off the table in Asia.
The key mover in the week had been with the oil market as we saw a plunge of WTI futures trading briefly below $45 per barrel (bbl), touching the lowest level recorded since the OPEC’s November 30th decision to cut output. This slide had been part of a bigger decline in crude oil prices as the market grows increasingly disillusioned with the extent to which the output curb by OPEC can reign in supply. A sustained build up in US crude could continue underpinning the downside bias for crude prices.
The key focus of the market at the start of the week is likely to be Sunday’s round two of French elections. The wide margin of approximately 20% seen in polls between the two candidates should find centrist Emmanuel Macron emerging victor against his opponent Marine Le Pen. Realization of the expected result in the first round has returned a significant portion of confidence to the markets and any further upsides from a Macron-win may be limited. The reverse, though unlikely, could significantly dent market confidence.
In addition to the French election, the key focus would likely rest on the Bank of England (BoE) policy meeting in which no change to monetary policy is expected. The attention would however be on the inflation report which could see updates to both growth and inflation outlook by the central bank. The market largely appear torn with regards to the outlook of the economy against the backdrop of Brexit negotiations and the guidance from the central bank could deal an impact on the market.
US monetary policy and Chinese data
With the passing of the May Federal Open Market Committee meeting, we are likely to look ahead to more monetary policy guidance as the Federal Reserve is expected to once again lift rates in June. Besides the update tonight on labour market conditions, including an appearance by Federal Reserve chair Janet Yellen, the upcoming week will be lined with more Fed comments. It is widely expected for the Fed to commence the guidance for June’s meeting and a lack of which could certainly weigh on the US dollar. Data docket meanwhile finds price inflation updates and retail sales from the US in the upcoming week. An expected rebound in April retail sales could boost US bourses.
Asian investors may find more updates from China including April’s trade and price inflation data, likely to exert mixed impact upon regional markets. As things stand, the market is expecting a moderation in export growth that could continue casting a gloom for the region post this week’s PMI data. Other key items due from Asia next week includes monetary policy meeting in the Philippines and Malaysia.