Asia week ahead: US data barrage, China PMI

Markets sat awaiting the Jackson Hole meeting for the bulk of the week, with many keeping to the side lines to ride out the event risk. 

Chart
Source: Bloomberg

The week ahead on the other hand will be decorated with several key data releases that could keep volatility alive within the markets. 

Market recap

Markets could be seen holding out most part of the week for the comments from Federal Reserve chair Janet Yellen and European Central Bank president Mario Draghi, both yet to speak at the time of writing. The anticipation for the degree of market-moving information to be gleaned from the Jackson Hole symposium had been mixed and has kept volume subdued. Movements for most markets were kept to a tight range in the week. Of course, we have also seen concerns over US politics punctuating the fore of the week with comments from President Donald Trump on the border wall and a government shutdown, lifting the risk-off sentiment for markets. Early gains for US bourses saw some retracement with the S&P 500 and the Dow Jones finding week to date changes both at approximately 0.5%.

On the other hand, we have seen rather resilient markets in Asia, seemingly unperturbed by politics concerns. Notably, the Hang Seng has once again affirmed its position as Asia’s favourite market, up 2.96% for the week, helped in part by earnings performances with more to look forward to next week. The local Straits Times Index was last seen with a modest 0.28% gain week-to-date.

A flurry of US data

After a week of Jackson Hole anticipation, the attention is not expected to deviate far from the US with data including Q2 GDP (second reading), core PCE and non-farm payrolls likely to keep the market busy. Expectations have been mixed with regards to data performance where an upward revision for Q2 GDP to 2.7% quarter-on-quarter (QoQ) has been penned alongside a stagnant core PCE growth for July. Meanwhile, consensus numbers suggest that the market continue to expect a robust labour market for the month of August, adding 180k jobs while keeping unemployment rate at 4.3%, which would bode well for US equity markets. Month-on-month average hourly earnings growth earnings may face some pressure, though growth is still expected to accelerate when compared to the same time last year, which could keep the market unfazed.

Of the lot, Friday’s labour market updates may be of the highest importance given Q2 GDP’s backward looking nature and weaker than expected consumer price index containing expectation for the Fed’s preferred gauge. Keep a close watch of the abovementioned items and their trickle-down effect for Asian markets in the week ahead.

China PMI release

Over and above US influences, the Asian region would find a busy economic calendar with China’s PMI likely to be on the top of Asian investors’ minds. Official manufacturing PMI and the private Caixin gauge will be released on Thursday and Friday respectively, both likely to decline slightly, though remaining in expansionary territory. Significant surprises here would have due effects upon Asian markets, though with economists long touted expectations for a moderation in growth into H2, downside surprises will be watched with greater scrutiny to validate any alarm necessary. Watch these numbers closely for Asian and Australian markets alike.

In a long list of data, markets in the region will also be watching unemployment, retail sales and industrial production for Japan. Meanwhile, Q2 GDP numbers will also be up from India and South Korea. The local Singapore market may however find a lack of domestic leads and could see external influences, including China’s PMI, serving as drivers instead.

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