A good run was seen for most markets into the end of the year, though a fraction of Asian indices remain in year-to-date (YTD) losses ahead of the end of the day.
I have been apologizing lately for overusing the word “uncertainty” and this is something that I hopefully will have to do less of in the New Year. Nevertheless, there will be good gap between now and better insights into President-elect Donald Trump’s policies, despite the vast amount of Twitter literature. Moreover, despite talks of more Federal Open Market Committee (FOMC) hikes, the next interest rate increase looks to happen only as early as June based on implied probabilities. This provides ample amount of room for economic indicators to guide market expectations in the interim.
Most markets will be closed on Monday, January 2 in light of the New Year holiday. Kicking start the year with a bang will be a series of manufacturing PMI data around the world, though the main focus will be on the US non-farm payrolls (NFP) data at the end of the week. Although the market is currently expecting December’s NFP to come in largely unchanged at 175k from 178k previously, NFP is hardly ever a non-event. Surprises could still whack prices in either direction and, on the upside, could reignite further US dollar strength, after the USD index tapered into the end of 2016.
Prior to the NFP data, markets will also gain insights into the Fed FOMC’s December 13-14 meeting via its minutes, to be released in the early hours of Thursday for Asia. While the first and only rate hike for the year had largely been within the market’s expectations, the market will likely look for clues as to what had supported the improved rate hike projections for 2017.
The amalgamation of which would put the relationship between the USD and Asian currencies in the spotlight. Asian currencies have generally been pressured in the year. YTD losses against the USD had been led by the Chinese CNY at approximately 6.5% and the coming week will be an important first note to the currencies trade.
Not to discount regional indicators, Asia would be seeing a series of tier-1 data in the upcoming week following China’s manufacturing data due overnight weekend. December inflation data will be arriving from Indonesia, Thailand, Philippines and Taiwan. A first look into Singapore’s Q4 GDP performance will also be of interest for both the local currency and bourses.
The current market consensus points at a 0.2% year-on-year (YoY) improvement for Singapore fourth quarter growth. Should the data match consensus, this will be a significant step down from the 1.1% YoY printed in Q3 and the lowest to be printed since 2009. Third quarter performance had been weighed by the slowdown across sectors. With high frequency data showing little progress, early October NODX having printed the worst YoY change in 7-months, it is no surprise to see the diminished optimism in expectations.
Other data to be released in the week includes Malaysia’s November Trade and India’s Q1 GDP annual estimate.