Asia week ahead: Traders can expect a packed week

The coming week is going to be a busy, busy one for the financial markets. 

Stocks
Source: Bloomberg

Apart from being packed with corporate earnings results, we have the Federal Reserve (Fed) and the Bank of Japan (BoJ) to decide on monetary policy. You will also have the US publishing their Q2 GDP report card while China will be hosting the G20 finance ministers this weekend 23-24 July. The discussion is expected to revolve around economic growth, Turkey’s failed coup and Brexit vote. Traders will have their hands full with possible trading cues with so much happening in the last week of July.

The Brexit aftermath saw global equities bouncing back higher than before the vote, led by emerging markets. The MSCI world index breached above 1700 barrier to touch 2016 highs. We have also seen US equities hitting record highs in recent sessions. The MSCI emerging market index powered to almost a 12-month high for the first three weeks of July. Will the outperformance carry on in the coming week? Will global equities start to pull back next month?

Meanwhile, Presidential hopeful Hillary Clinton is poised to become the Democratic nominee, after Donald Trump accepted the nomination to be the Republican candidate. Polls showed that the US is heading into a very tight presidential race in November.

Fed and BoJ to hold the line after BoE and ECB

Meanwhile, the Fed is almost certain to leave rates unchanged as well when they meet next week, 26-27 July, according to recent comments from Fed officials. What the investors will look out for is their post-decision statement, where we could see the message saying that the US economy is on a more solid footing than it was in June. This would set the stage for the next interest rate hike if economic data holds up in the coming months. Financial markets had been quite orderly since the Brexit vote, so that will also help with the Fed’s assessment of global conditions, alongside a rebound in job gains.

The decisions from the BoE and ECB have also bought time for BoJ to sit on its hands despite heightened expectations for them to do more. A pre-Brexit BBC radio interview with BoJ governor Kuroda revealed that the central banker dismissed the idea of helicopter money. In fact, the BoJ is restricted by law to directly finance government spending. If we are talking about BoJ buying sovereign bonds while the government steps up fiscal stimulus, then the Bank is already doing that. Nonetheless, this situation may be permitted if put to a parliamentary vote.

Furthermore, the Japanese government is arranging to roll out a stimulus package of at least JPY 20 trillion ($188 billion), according to various news reports. If true, this will be double the initial envisaged amount of JPY 10 trillion, as the package will include projects for FY 2017 and beyond. PM Abe is expected to seek cabinet approval for the stimulus package in early August.

Given the heightened expectations for BoJ to introduce additional easing measures, the lack of any extra stimulus will increase market volatility. Watch the Japanese yen closely.

Earnings season

Some of the biggest technology companies are set to announce their earnings next week, including Apple, Alphabet Inc, Facebook, Amazon. Other notable companies include Ford, Deutsche Bank and Merck. In Singapore, there will be nine STI companies revealing their income, including OCBC, UOB, SIA, SGX and Sembcorp Marine.

Meanwhile, US will announce the first estimates of Q2 GDP on Friday, 29 July, where expectations are for a 2.6% annualised increase, which will be the strongest pace in a year. Accelerated household spending should have driven economic activity in the second quarter. Japan is expected to release information on CPI, retail trade and factory output. Singapore will report June inflation and industrial production figures, alongside the unemployment rate and money supply data.

Denne informasjonen er utarbeidet av IG, forretningsnavnet til IG Markets Limited. I tillegg til disclaimeren nedenfor, inneholder ikke denne siden oversikt over kurser, eller tilbud om, eller oppfordring til, en transaksjon i noe finansielt instrument. IG påtar seg intet ansvar for handlinger basert på disse kommentarene og for eventuelle konsekvenser som et resultat av dette. Ingen garanti gis for nøyaktigheten eller fullstendigheten av denne informasjonen. Personer som handler ut i fra denne informasjonen gjør det på egen risiko. Forskning gitt her tar ikke hensyn til spesifikke investeringsmål, finansiell situasjon og behov som angår den enkelte person som mottar dette. Denne informasjonen er ikke utarbeidet i samsvar med regelverket for investeringsanalyser, så derfor er denne informasjonen ansett å være markedsføringsmateriale. Selv om vi ikke er hindret i å handle i forkant av våre anbefalinger, ønsker vi ikke å dra nytte av dem før de blir levert til våre kunder. Se fullstendig disclaimer og kvartalsvis oppsummering.

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Denne informasjonen er utarbeidet av IG, forretningsnavnet til IG Markets Limited. I tillegg til disclaimeren nedenfor, inneholder ikke denne siden oversikt over kurser, eller tilbud om, eller oppfordring til, en transaksjon i noe finansielt instrument. IG påtar seg intet ansvar for handlinger basert på disse kommentarene og for eventuelle konsekvenser som et resultat av dette. Ingen garanti gis for nøyaktigheten eller fullstendigheten av denne informasjonen. Personer som handler ut i fra denne informasjonen gjør det på egen risiko. Forskning gitt her tar ikke hensyn til spesifikke investeringsmål, finansiell situasjon og behov som angår den enkelte person som mottar dette. Det er ikke utarbeidet i samsvar med lovens krav for å fremme uavhengighet av investeringsanalyse og som sådan er ansett av å være markedsføringskommunikasjon. Selv om vi ikke er hindret i å handle i forkant av våre anbefalinger, ønsker vi ikke å dra nytte av dem før de blir levert til våre kunder.