Asia week ahead: Fed’s Jackson Hole symposium

It had been a tumultuous week for markets against the backdrop of on-going US-China trade tensions and recession fears, and the upcoming week offers little promises to be a less volatile one given the items on hand.

US-China trade tensions in view

Following a week where we have seen partial delays to the expected 10% tariffs on another $300 billions of Chinese imports, China had instead vowed retaliation into the end of the week, whipsawing markets. To be fair, it appears that the motivation for the partial delay announced by President Donald Trump stemmed primarily from concerns of the domestic economy than perhaps offering an olive branch. Moreover, as China had expressed, the move had been inadequate.

President Donald Trump had suggested into the end of the week that a call may be made with Chinese president Xi Jinping ‘very soon’. What this entails at present remains uncertain, but the US-China trade issue will be one item keeping the markets cautious into the coming week. After seeing China letting go of the yuan past the 7.0 level against the greenback, further retaliation expected from China that ‘may not be limited to tariffs’ buoys the uncertainty and could keep haven assets in favour. One to watch. Political tensions in Hong Kong, one that President Donald Trump had also injected views on this week, would be another item that could potentially escalate and implicate Asia markets.

The challenges for monetary policy

The focus will primarily be on the Federal Reserve in the coming week with the annual Jackson Hole Policy Symposium set to commence on Thursday. With this year’s theme being the ‘Challenges for Monetary Policy’, it would be a timely update on views and outlook from central bankers.

Following the less dovish than expected surprise from the July Federal Open Market Committee (FOMC) meeting, we will also be expecting the meeting minutes in the Wednesday US session. The Jackson Hole congregation, however, would offer a more updated look into the Fed’s thoughts particularly after seeing trade tensions between US and China took an ugly turn in the time since.

Against the backdrop of further tariffs escalation and the latest warning signs of recession from the bond market, the market had once again lifted its rate cut expectation for the September 17-18 FOMC meeting. The fear here is that the Fed may not deliver despite growing concerns that the Fed had fallen behind the curve in easing monetary conditions. While a further dovish rhetoric is expected, the likelihood for the pre-empting of another rate cut after just referencing a ‘mid-cycle adjustment’ in their July meeting may be a stretch. This could further facilitate the greenback strength, but for the equity market, such an outcome would be one to further dent sentiment. Keep watch of this event risk into the end of the week.

Source: IG Charts

Asia indicators

This week had seen to a series of disparate economic performance between the US and Asia. While US indicators including the likes of retail sales had surprised on the upside, comparatively, the releases out of China such as retail sales and industrial production had disappointed. The local Singapore market’s July non-oil domestic exports (NODX) had also chalked up a fifth consecutive month of decline showing weakness in demand from various Asian regions.

While the releases in the week ahead will be few and far in between, indicators such as GDP releases out of Thailand will be watched. Inflation updates will be coming through from the likes of Hong Kong, Singapore and Japan across the week. A preliminary reading of the August manufacturing PMI will also be seen in Australia, Japan, the eurozone and US.

For more updates, do follow my twitter at @JPan_IG.

Have a good weekend!


The information 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 Bank S.A. 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 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. See full non-independent research disclaimer.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 30
  • 2-point spread on Switzerland Blue Chip
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.