This information has been prepared by IG, a trading name of IG Markets 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.
One item that carries through from this week is the attention on bond market performances. While investors expected bond market volatility to pick up this year, it had unfolded early as developments surrounding Japan and China induced jitters, briefly capping gains for Asian indices, one to keep on the radar.
US earnings, data
We remain in anticipation for the first of US bank earnings and December’s CPI as we pen this, but the week ahead certainly carts more financial sector earnings and economic indicators from the US.
The likes of Citigroup, Bank of America and Goldman Sachs come in the heels of this week’s releases for a week dominated by financial sector earnings. Noise for big bank earnings had been widely expected as a result of tax law changes, and the market should be looking past any poor performances from these one-time charges. Nevertheless, any dips should be well-supported and could make for good entry given the expectations for longer-term improvement as a result of the tax reform and the bond yield trajectory. The financial sector ETF (XLF ETF) will be the vehicle to capture these moves next week.
Meanwhile, indicators including industrial production, housing starts and the University of Michigan consumer sentiment are also anticipated next week. Improvements for both industrial production and consumer sentiment have been penned in by economists with potential for upside surprises for the latter given the positive market performance of late.
The wash up of the above may mark for an upward bias in the coming week for both the US dollar and indices, though one would also need to be cognizant of a government shutdown risk into the end of the week. For the year-to-date star performer, the energy sector in US and Asia alike, Thursday’s OPEC monthly report will also be one to watch.
China’s Q4 growth
China’s Q4 GDP will be the key release in the coming week with market’s consensus pointing to a slowdown to 6.7% year-on-year (YoY), bringing full year growth to 6.8%. Accompanying the release will be December’s industrial production, retail sales and fixed asset investments, mostly expected to stay unchanged from November’s figures. Early releases for Q4 have seen some moderation, particularly for data such as industrial production and retail sales, supporting the expectations. Watch for deviation from consensus for an impact on the broad Asian region.
Additionally, indicators including Japan’s machine orders, producer price inflation, and tertiary industry activity are some items due. For the local Singapore market, December’s non-oil domestic export will be watched with a YoY acceleration projected. As previously highlighted, the local STI sees resistance ahead of the mid-2015 high at 3549.85 and has found 3520 levels a region to consolidate this week. The interest will be to see if prices may attempt a break in either directions, which may take a strong trigger.