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Asia week ahead: US NFP, Japan Tankan

The past week had seemingly been one spiced with a little of everything. Early pressure from geopolitical tensions gave way to anticipation for monetary and fiscal policy developments. 

Japan business
Source: Bloomberg

This was before data releases grasped the market attention into the end of the week, likely to remain the case for the incoming week as well.

This week’s hawkish reaffirmation from the Federal Reserve (Fed) speakers and initial positive reactions towards President Trump’s latest tax framework had lifted US indices, topped off by an upward revision for US’s Q2 growth. The same cannot be said for Asian equity markets with the MSCI Asia Pacific index set to record its first weekly decline since early August. Adjustments ahead of market holidays in several Asian markets had become deadweight for the market rally.

US jobs data

The commencement of a new month brings with it several key releases, though the spotlight may very likely shine on September’s jobs data in the week ahead. Friday finds the trio of releases, namely September’s non-farm payrolls (NFP), unemployment and average hourly earnings updates, with mixed projections seen. On one hand September’s payroll additions may moderate further to 75k from August’s disappointment. On the other hand, average hourly earnings could accelerate to 0.3% month-on-month from the previous 0.1% reading, based on market consensus, presenting conflicting forces for the USD.

While the market may remain well aware that these numbers are susceptible to hurricane disruptions, significant deviations from consensus could still deal an impact to the market. In particular, the US dollar pathway has been in focus of late, making next week’s jobs update critical to watch. A sustained strengthening of the US dollar could further derail the rally for Asian markets. Of course, prior to Friday’s releases, US’ September ISM manufacturing and Fed chair Janet Yellen’s Wednesday address would also be important nodes for the currency market trade.

Japan’s Q3 Tankan

Tuning to high-impact items in Asia, Japan’s Q3 Tankan, or business short-term economic sentiment survey, would likely shape sentiment for Asian markets at the start of the week, alongside China’s weekend official purchasing managers index (PMI) numbers release. Broadly steady JPY, robust production and export performances may underpin an improvement for Q3 business optimism in the Japanese market, one to watch for the outperforming Nikkei 225.

Beyond Japan, we may see a light trading next week with onshore markets in China and South Korea away while the Hong Kong bourse would also be off on two occasions. The start of the month nevertheless brings along with it inflation insights into Asian economies from the likes of Thailand, Indonesia, South Korea and Taiwan. Separately, while it may serve more as a lead for the following week, China’s September foreign reserves will also be updated on Sunday, shedding light into the reserve situation after the CNY boomeranged against the USD in the month.  For the local Singapore market, the local September PMI, due on Monday, would likely be the key release. 

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