Asia week ahead: US CPI, China data

Global equity markets trudged through a week caught between the tech positivity post Apple Inc.’s earnings and oscillating sentiment over the US-China trade dispute.

US flag
Source: Bloomberg

Meanwhile, the series of central bank meetings saw the Bank of Japan (BoJ) delivering one of the more interesting conclusions where further flexibility in their yield curve control drew reactions in the market.

While we still have a slew of earnings to watch across the globe, the relatively quieter week ahead will likely have US inflation at the top of our minds in addition to a string of Chinese numbers in Asia.

US inflation

This week saw the Federal Open Market Committee (FOMC) meeting passing with the absence of fresh insights into the committee’s outlook. The affirmation of the economic conditions and the paving of way for a September hike had unfolded as expected, bringing little to the markets.

The attention had instead been captured by the US-China trade tension with the contemplation of further talks and potential higher tariffs confounding the markets. The uncertainty of this known-unknown once again took a hit on prices, sending most Asia markets lower week-to-date. It does appear that the two countries had again reached a crossroad as the stress is on to look for resolution before the $200 billion tariffs consultation period comes to an end when August concludes.

For the week ahead, however, what we do know and will be following includes US’ July inflation and JOLTs report from the data docket. The current market consensus is hunting for an acceleration of July’s CPI to 0.20% month-on-month, up from the 0.1% reading in June. Upsides surprises may very well deliver a boost to the greenback’s strength, and likely so with the implementation of the tariffs among others pushing at prices. This is as the US dollar index remain stuck in consolidation between the 94.00 and 95.50 levels since mid-June, one to watch. On earnings, approximately 9% of the companies on the S&P 500 index is scheduled to report their performance next week. Key names include the likes of Walt Disney Co.

Asia indicators

Asia markets will find a slew of central bank meetings in the coming week starting with the Reserve Bank of Australia on Tuesday. Central banks in New Zealand, Thailand and the Philippines will also decide rates, though only the Bangko Sentral ng Pilipinas (BSP) is seen with the potential to shift their rates in light of rising inflation.

The majority of markets here would likely be caught up with a string of Chinese indicators including July’s trade, inflation and loan conditions. Tuesday’s trade numbers are seen with expectations for export to moderate to 10.0% year-on-year (YoY) from 11.2% previously in US dollar terms, congruent with the slowing of growth pace as reflected in July’s PMI readings. Any significant miss here could fuel worries over the impact of on-going trade tensions upon Asia economies’ performances, one to watch for any impact. Japan’s Q2 GDP reading will also be seen into the end of the week, likely to reverse last quarter’s decline at a growth of 0.3% quarter-on-quarter (QoQ). With the latest introduction of flexibility to the yield curve control policy from July’s BoJ meeting, the meeting’s summary of opinions due Wednesday would be of high importance as well.

For the local Singapore market, divergent performance had been seen with the first two of the trio of bank earnings, DBS, missing the growth consensus. That said, both had been congruent in terms of their cautious guidance. OCBC will be the last to report on Monday, one to watch as the STI struggle with the 3300 handle.

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