Asia week ahead: US data, China PMI

The past week had been one dominated by trade tensions following President Donald Trump’s cue to further escalate the trade skirmish with China. 

US flag
Source: Bloomberg

This had been via Tuesday’s directive to look into an additional 10% tariffs on $200 billion of Chinese imports, earning the pledge to retaliate from China.

Amid the lack of fresh leads, equity markets can be seen trading broadly to the tune of the jitters with the Dow concluding Thursday with the 8th consecutive session of declines and the likes of the HSI tumbling below its 200-day moving average. Moving into the new week, we are seeing an abundance in economic data to provide us with a view of the economic momentum, though one should not be surprised to find the abovementioned trade issue having its impact lingering. China’s latest response promised “corresponding number and quantity” should US release the list of the $200 billion imports had been the last move in this game of trade chess.

Data abundance

US-China trade tensions aside, there would be a whole series of data to watch, particularly from the US next week. Having seen the US dollar index, measured against six major currencies, touched the highest level in eleven months in the week at 95.52, US growth momentum will be worth scrutinising in the coming week.

The likes of June’s conference board consumer confidence index, US Q1 GDP (third estimate), May personal income and spending, and also the core PCE updates would be assessed against Fed chair Jerome Powell’s view that the case is “strong” for the further rate hikes from this week’s ECB forum. The current consensus is for Q1 GDP to stay at 2.2% quarter-on-quarter (QoQ) in this second revision, one to watch. Likewise for the core PCE, a number closely look at by the Federal Reserve, is expected to be unchanged at 0.2% month-on-month (MoM). Personal income and spending meanwhile are expected mixed with consumption likely to slow down on a month-on-month (MoM) basis and income to accelerate slightly in Friday’s release. 

IG’s US dollar basket chart finds prices trapped in a narrow range of between 93.90 and 94.92, though uptrend looks intact at the moment. Watch breaks on the upside with any surprises in the releases.

Asia economic indicators

Asia markets are expected to see a packed data week, although the key release, China’s June NBS PMI, will only be seen after trading ends on Saturday. The current consensus is for the manufacturing gauge to show a slowdown to 51.6 from the 8-month high of 51.9 previously, which is nevertheless a strong number. Any positive surprises will likely help to shore up some confidence for regional markets that had been badly hit by the negative trade sentiment of late.

In terms of central bank meetings, Bank Indonesia will also be holding their central bank meeting with the expectation being for a hike to take place with their 7-day reverse repo rate after having just seen a 25 basis point rise in their last meeting. USD/IDR looks threatening to break the ascending triangle with a slew of reasons undermining the local currency, one to observe in the coming week.

For the local Singapore market, we have both May’s inflation and industrial production release on Monday and Tuesday respectively, though external factors will likely retain a strong impact on the local market as per usual.

USD/IDR

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