Asia week ahead - Happy New Year?

Market recap

Prior to the last trading session of the year for most of the markets, it is evident that a sea of red characterizes the year-to-date performance for global equity indices. Interestingly, though, the worst Christmas eve had been followed by the biggest single-day point gain for the Dow, leaving us with the question on the state of markets going into the new year and seemingly pre-empting the volatility that looks set to continue. 2018 may be remembered as the year with some of the best earnings but also the worst market plunges amid the ever-so-often political and geopolitical influences. Going into 2019, there are little doubts that we would continue to find updates from many of these issues lingering. The questions would perhaps be whether prices can return to trade according to economic fundamentals and how the inkling of a slowdown sighted through the telescope would unfold for markets.

US growth in question

With New Year’s Day falling on Tuesday, a slow start to the week is expected. That said, the incoming week packs some of the key releases for the US including December’s ISM manufacturing reading and payrolls update, ones to implicate the market.

Thursday’s ISM manufacturing index had been pencilled in for decline to 58.0 from 59.3 previously following softer regional surveys, edging towards the lower end of the range it had been waffling. Amid the concerns over growth, there could be heightened focus on this piece of data in comparison to Friday’s labour market updates that had been largely assuring tight employment conditions. December’s payrolls and unemployment are expected to once again fall in line with the recent positive showings while the wage inflation is expected to improve, doing nothing more than affirming the Fed’s view on strong economic conditions. Watch the ISM manufacturing data for any progress in the greenback and the equity market alike. Any disappointment here could invite over-reading from the market and keep the current downtrend in play.

On China

Besides the US, China is set to see the last PMI reading for 2018 next week as December’s official and Caixin PMIs are simultaneously expected to decline. The current consensus for Monday’s official reading finds the manufacturing gauge slipping into contractionary territory, one to watch with potential de-risking and window dressing ahead of the year-end for markets that remain open in the region. The Caixin manufacturing number, due Wednesday, meanwhile could inch closer to the 50.0 midpoint at 50.1 according to the median forecast.

Other tier-1 data due in the Asia region includes inflation updates in South Korea, Indonesia, Thailand and the Philippines. An early indication of the Q4 growth situation from Singapore will also be expected on the first trading day of the year, one to watch for hints on the implications of the US-China impasse. The advance Q4 GDP due Wednesday morning has analysts looking for a slowdown to 3.3% quarter-on-quarter from the 4.7% reading in Q3. Likewise for the Singapore market, deviations from the consensus could send ripples through to the local Straits Times Index within the wider consolidation trend in place currently.