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Asia week ahead: US Q2 GDP, China PMIs and tariffs watch

Into the final week of August, Asia markets remain traversing between concerns of US-China trade and further growth deterioration.

While we have yet to hear from Fed Powell, expect the contemplation of further growth slowdown to remain a key theme in the coming week.

Looming September 1 tariffs implementation

Asia markets were largely seen trading in a narrow range this week following a positive start to the week. President Donald Trump who met Apple Inc (All Sessions) CEO Steve Jobs over the weekend had noted that a ‘good case’ on tariffs had been made. In addition, an extension of the easing of Huawei sanctions had also contributed to the relief.

The above said, there appears to be little progress on the US-China trade issue from the surface with mixed rhetoric continuing through the rest of the week from both sides. The matter, as seen from the fluctuations and reactions within markets, remains a key concern going into the end of the month and ahead of the September 1 tariffs implementation deadline. Even though a partial delay had been seen, the kicking in of the fresh tariffs next Sunday is expected to lift US-China trade tensions by a notch. China had warned earlier in the month that retaliation will follow any further tariffs from the US, and this will likely induce greater caution within the market into the end of the week. One to watch.

Recession risks contemplation

This week had also seen the US 10-year to 2-year yield curve inversion symptoms return into the end of the week. Recession warnings had once again been bountiful, triggered as well by the poor preliminary August PMI readings out of advanced economies such as the US. The flash Markit manufacturing PMI had unexpected fallen into contraction territory at 49.9 against the consensus for an improvement to 50.5. While hopes are high ahead of Fed Powell’s Jackson Hole address for a 25 basis points cut in the September meeting, the deviation seen in the form of positive consumption performance leaves room for uncertainty.

With weeks to count towards the next Federal Reserve meeting, the performance in the data will be key. Watch the relatively backward looking second reading of US Q2 GDP on Thursday, alongside the likes of conference board consumer confidence index, durable goods and core PCE numbers among others. The current market consensus is looking for a downward revision in US Q2 GDP to 2.0% and the conference board consumer confidence index may soften to 130.0 from 135.7 in July.

Asia indicators watch

Asia markets will also find a string of indicators to watch in the coming week and a central bank monetary policy decision from South Korea due on Friday. Following the surprise cut in interest rates by Bank Indonesia this week, the market will be watching the Bank of Korea intently for any guidance on further moves. The current consensus suggests that the market is not looking for back-to-back cut rates next week despite the onslaught of geopolitical concerns plaguing this Asian tiger.

On data, China’s official PMI will also be released over the weekend. August’s manufacturing PMI is expected to soften further to 49.6 from 49.7 according to the market consensus and any disappointment may further weigh on regional markets in addition to the concern over tariffs. The local Singapore market meanwhile will see July’s industrial production release at the start of the week.


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


Have a good weekend!


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