Asia week ahead: China PMIs, US NFP
Another week, another bout of trade war issues driving markets. While the fresh week offers little promises that we will escape the trade cloud, the turn of the month does present a slew of indicators for a check on the economy.
Trade war noises had once again been dominant for markets into the last week of August. China’s surprise retaliation followed by President Donald Trump’s announcement of higher tariffs saw US markets hit into the end of last week. Likewise for Asia, it had been a sea of red seen at the start of the week.
While sentiments improved into the end of the week, as told in our morning note, it nevertheless looks to be only a short-term relief for markets with the rift between US and China narrowing by a little despite China’s intentions to defer further escalations in trade. The September 1 tariffs exchange remains looming ahead of us and may be one to affect economic performance and confidence nonetheless. Any eleventh-hour decision to postpone the implementation could be one to sustain gains from Friday, though few may be counting on this. With this week’s development, the likelihood of the US-China trade war being a long-drawn process has only increased and one should not be surprised that we continue to find headline driven moves into the fresh week.
US labour market update
Amid the confusing state of the US economy whereby warnings of risks and uncertainties have been as prevalent as data surprises, we will be watching the latest August labour market update for insights into the employment situation. Non-farm payrolls’ performance had deteriorated into the year though remaining healthy on a broad trend basis. This is likewise the expectation for August whereby the market had pencilled in a consensus for 155k additions, down from the 164k in July. Average hourly earnings and the unemployment rate are expected to remain stagnant from July at 0.3% month-on-month (MoM) and 3.7% MoM respectively.
Besides the payrolls data, another key release in the coming week will be the ISM manufacturing update for August. Compared to the labour market update and the related retail performance, the manufacturing sector had shown a clear downtrend in performance, weighed to a large extent by the ongoing trade uncertainties. A slight improvement to 51.4 is expected for the upcoming Tuesday release from 51.2, one to watch. Fed speakers will also be heard across the first week of September, ones to watch for balance of Fed views ahead of the FOMC meeting.
Asia markets will have China’s official PMI numbers, released on Saturday, to kick off the week, keeping an eye also on the abovementioned tariffs implementation over the weekend. The private Caixin manufacturing PMI follows right after on Monday with the consensus pointing towards further foray into contraction territory at 49.8.
On central bank meetings, Asia Pacific markets will see the Reserve Bank of Australia meeting decision on Tuesday with the expectation of no change in rates. Q2 GDP growth numbers will be out from South Korea and Australia on Tuesday and Wednesday respectively while the rest of Asia will see a splatter of August CPI data from the likes of Indonesia, Thailand and Taiwan. The local Singapore market will find August’s manufacturing PMI out on Tuesday.
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