Asia Week Ahead: Central bank meetings and January lookback

Central bank meetings from the US, UK and Japan dominates market in the upcoming week, ahead of next Friday’s US non-farm payrolls (NFP) data.

The fed
Source: Bloomberg

The week starts late for many Asian economies with the Chinese New Year holidays which could make for thin trades. Nevertheless, the start of February promises a new set of indicators for Asia.

The first 100 days of President Donald Trump commenced and the man in the white house wasted no time issuing orders from the Trans-Pacific Partnership (TPP) withdrawal to the building of the Mexican border wall. Reactions had mostly been positive into the end of January, with the market taken to the aspects of infrastructure building. Both the S&P 500 index and DJIA index inched up to fresh highs in the week, the latter crossing the 20,000 milestone.

Asian markets, which have shown resilience at the start of the week, despite de-globalization concerns, were further inspired by Wall Street’s climb. As January comes to an end next week, a lookback found gains across the board for Asian markets excluding Japan. For the local STI, early concerns of sustainability above the 3,000 mark were quashed with another leg up for the Trump-inspired trade. The rally had also been supported by another favorable set of US earnings report thus far. This is a trend that could continue into the following week with another one-fifth of companies due to report on the S&P 500. 

Central bank watch

The upcoming week is packed with central bank meetings though no interest rate shifts are expected for the Federal Open Market Committee (FOMC), Bank of Japan (BoJ) or Bank of England (BoE) meetings. Fed Chair Yellen has been expected to not diverge too far from the rhetoric of improving economic conditions and a gradual approach towards raising interest rates. For BoJ and BoE, the inflation outlook reports and growth outlook for the former could present more interests for markets. The possibility of an upgrade to the growth outlook in the BoJ’s quarterly outlook report would be a driver for USD/JPY action in the upcoming week. 

A key feed for the Fed FOMC, US NFP data for January, will be released after the meeting on Friday. The current market consensus for January’s print sits at 168k, up from 156k previously, reflecting the expectations of improving labor conditions and potentially providing a boost for the waning USD.

 

Asian indicators

For the region, one would find a large segment of Asian markets closed at the start of the week for Chinese New Year holidays. However this does not discount the stream of feeds from Asia. The highlight for the week ahead will be China’s official manufacturing PMI data on Wednesday and the private Caixin manufacturing PMI gauge when onshore markets return on Friday. Investors will be searching for signs that the stabilization of the manufacturing conditions remains underway.

Besides the anchoring BoJ meeting, December retail sales, housing starts and industrial production data will also be released early next week for Japan, playing a part in shaping expectations. For the local market, the first set of manufacturing indicators arrives Wednesday in the form of January’s PMI numbers. 

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