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Expect markets to retain its focus on the trade theme as we head into the end of the month.
Trade front and centre
Overshadowing all other matters into the end of the week had been the trade tariffs tug-of-war between US and China. Complacency ahead of the expected US announcement certainly saw deep pullbacks within markets, made worse by China’s reactions. While analysts in Citi had noted that the scale of US tariffs had been smaller than expected, targeting up to $60 billion worth of Chinese imports than tariffs itself, the rhetoric had not been all that positive. US expanded the number of countries in their metal tariffs exemptions list but seemingly left out China. Meanwhile, China toughened their warnings, going as far to outlining tariffs plans that could hit up to $3 billion worth of US imports.
Whether this indeed is US heading into ‘the brink’ of a trade war with China, it does remain to be seen. Certainly, both parties previously reckoned that there will be damages. However the concern is that the Trump administration appears to regard a trade war as one that is ‘easy to win’ and China is ‘not afraid of engaging in one’. Equity markets have responded in kind with a sea of red, including US futures even as we pen this. Amongst sectors, anticipation for tech goods to be affected had inflicted pain upon the said sector across the Asian region.
Investors are likely awaiting further clarity on the complete list of items targeted by the US, with the list due to be out in 15 days. The expectation is that matters will worsen with the actual implementation of tariffs that would induce tit-for-tat moves. Any conciliatory remarks from either parties would be a much needed short-term painkiller, one to watch next week.
Over and above the abovementioned theme, the end of the month offers a trickle of data indicators to follow. With the Good Friday and Easter Monday holidays lined up into the end of March, most of these releases are expected in the early half. Thin volume may be seen, barring sudden trade developments to lure traders out. Items including March’s conference board consumer confidence index, the final reading of Q4 GDP, core PCE and personal income and spending are ones to follow for an assessment of the economy. A series of Fed speakers will also be heard following last week’s FOMC meeting for more insights into the US monetary policy outlook.
Asia would find one central bank meeting in Thailand on Wednesday with no changes in monetary policy expected. Few tier-1 data will be seen other than South Korea’s final Q4 GDP data, though it would be worth watching Japan’s retail sales, unemployment and industrial production releases. The local Singapore market would watch February’s industrial production. Over the weekend, China’s PMI will also be released.