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Asia week ahead - China growth, US earnings
It all boils down to growth. That remains the takeaway from this week’s trade as we look ahead to the early Q4 GDP release from China and US earnings for more hints on the health of the economy.
Week recap – trade hope
The impact from the weaker than expected December trade performance off China on Monday had been a short-lived one as announcement for more Chinese stimulus, US earnings and trade hopes lifted global equity markets in tandem. On politics, both the sustained government shutdown and the chaos post the failure of the Brexit vote had largely been shrugged off by the market with the abovementioned issues circling growth serving as the drivers instead.
While there will be more of the same to watch in the coming week, the scrutiny on US-China trade relations would probably be amongst the lot. Reports on US considering deeper concessions fuelled hopes for further progress on this key input for the global growth trajectory, one that will likely be discussed as world leaders convene in Davos for the World Economic Forum. US representatives will be led by US treasury secretary Steven Mnuchin, potentially picking up the topic despite the lack of attendance from President Donald Trump himself.
US earnings assessment
While US markets would be away on Monday, this by no means mark a lighter week with 59 companies or approximately 11.6% of the total S&P 500 constituents due to report their Q4 performance. After having the likes of Apple Inc.’s guidance disappointment setting what could have been a rather low bar for expectations, banks had opened the earning season’s on a relatively positive note. As seen via prices, the financial sector on the S&P 500 index climbed 4.34% week-to-date as of Thursday close, helped in part by other macro factors as well. Trading this on the S&P 500 index’s financial sector ETF (XLF ETF) would have seen a change of a corresponding 4.33% move in the last four-session period, reflecting the swings during this contentious earnings season.
Looking into the fresh week, a more diverse set of earnings is expected to come from the various sectors. For the Dow Jones index, the likes of Johnson & Johnson under healthcare and International Business Machines off the tech sector will be seen. Intel Corp.’s release on Friday will probably be the most watched, although arriving after the market close, as chipmakers remain in the spotlight in light of the trade implications. This preludes the likes of tech giants such as Apple Inc. in the following week and could really play into shaping market sentiment. With the Dow and the S&P 500 indices at inflection point as positive sentiment meets key resistance levels, the releases in the coming week have a huge part to play in shaping the price trend from here.
Central bank meetings
As the market turbulence into end-2018 gathered concerns from authorities and central bankers alike, January’s central bank meetings are not expected to deviate far from the current rhetoric of reassurances. The Bank of Japan (BoJ) will announce their monetary policy decision on Wednesday ahead of the European Central Bank (ECB) and Bank Negara Malaysia (BNM) on Thursday with neither of these monetary policy committees (MPCs) expected to issue changes.
Post the weak set of data this week, both the weakest growth in five years from Germany and the disappointment in Japan’s December core CPI reading, central banks in the Eurozone and Japan would likely be more than convinced of the need to stay put and provide reassurance as risks on the downside gathers. Specifically for the ECB, the job could be a difficult one as the softening growth momentum induces worries across the region, all while the Brexit uncertainty simmer in the countdown to the 29 March deadline. Look to how ECB President Mario Draghi manages the guidance here that would perhaps have the greatest implications for markets.
China growth in focus
Perhaps the most important piece of data release in the coming week would be China’s Q4 growth number, though this would not be as meaningful as the accompanying higher frequency industrial production and retail sales reading for December. The current consensus for the elusive headline GDP sits at 6.4% year-on-year, just a touch lower than the 6.5% in Q3, and one should not be surprised if this expectation is met. Despite the implementation of tariffs in different traches upon Chinese good by the US, frontloading and the softer yuan was seen to have cushioned the impact. December’s trade data, however, had told a different story that could carry on into the rest of this series’ release, particularly for industrial output. Should retail sales likewise disappoint, the risks will be to do the downside.
Other economic indicators to watch in the week including Markit manufacturing PMI in the Eurozone, US and Japan, while the US government shutdown keeps certain high frequency releases away. Inflation updates across Asia such as Hong Kong, Singapore and Malaysia are also lined up for next week to shed light on the pace of price growth in the region.
Denne informasjonen har blitt forberedt av IG Europe GmbH og IG Markets Ltd (begge IG). 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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