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The passage of the first round of French election yielded the expected results with centrist Emmanuel Macron and far-right Marine Le Pen rising through to the second round. The market had taken this as a sign of reinforcement of stability for the European Union and the elimination of this risk had brought money back from safe havens to the likes of equities. US earnings had similarly contributed to the positive sentiment in the equity markets while the highly anticipated tax announcement by President Donald Trump had provided little drivers for the market.
The same, however, cannot be said of the Chinese stock market with concerns of tightening regulations creating a divergence between the Chinese bourses and the rest of Asia. The Shanghai composite had ended the week down 0.58% while the CSI 300 was last seen closing the week down 0.78%, printing the third consecutive week of decline.
The upcoming week will be a short one for most markets here in Asia with most onshore markets closed for Labour Day holiday on Monday. That said, it certainly is not expected to be one short of leads with two major central bank meetings and US non-farm payrolls data due. This is in addition to multiple PMI updates.
Central bank meetings
Following the Bank of Japan (BoJ) and European Central Bank (ECB) meetings this week, the upcoming week will see more central bank meetings from the Reserve Bank of Australia (RBA) and also the Federal Reserve. No changes in the monetary policy has been expected for both meetings. The RBA’s quarterly statement on monetary policy will however be due on Friday and guidance on the policy path would be a key item to note.
Meanwhile the next Federal Open Market Committee (FOMC) meeting convenes between 2-3rd May. Although no change in interest rates have been expected, this will be the last meeting before their June meeting, one that had been marked out by the market to see the next interest rate hike. The upcoming meeting could certainly pivot the attention back to monetary policy and potentially deal an impact on USD pairs.
Furthermore, we also have April’s non-farm payrolls data due on Friday. The previous reading had severely disappointed markets, owing to weather elements. Market consensus for the upcoming release sits at 193k, a relatively strong figure and the market is expected to keep watch to see if the data can match expectations. This could further deal an impact on the relatively beaten US dollar.
Separately, a check on manufacturing production is expected from China. Over the weekend, official manufacturing PMI for China will be released. The previous reading diverged from the private Caixin gauge. Market consensus for the upcoming releases however expects only moderate change from the previous figure. For the Asian market that has been concerned on whether we are seeing a plateau in production growth, this release serves as a health check for Asia’s anchor. Caixin services PMI will be due later on Thursday.
Other Asian indicators due in the week ahead includes April inflation updates from Thailand, South Korea and Indonesia. Indonesia’s Q1 growth update will also be due on Friday a mild acceleration in growth is expected by the market. The local market meanwhile expects an update on April’s PMI on Tuesday.