Asia week ahead: US-China trade talks watch

A relatively quieter week lies ahead for global equity markets that have been broadly weighed down by the slump in oil prices, helped only into the end of the week from a fresh wave of optimism over US-China trade relations.

china & EEUU

More US-China talks updates?

The key movers for global equity markets in the week had largely been unexpected factors including the slump in crude prices from OPEC’s latest outlook and news flows surrounding US-China trade talks. The latter were certainly seen aiding US and many Asia indices to retrace losses into the end of the week. Reports of increased efforts in the negotiations prior to the G20 meeting, a concessions list from Beijing and even mixed reports of China tariffs on hold underpinned the changes. Given the stranglehold that the matter has on markets in the short-term, it would not come as a surprise to see further updates swaying prices in the coming week. This is more so given the proximity we have to the G20 meeting in end-November.

US officials had outlined continued talks as the “best we can hope for” this week, which is also the base-case scenario that we are looking for within the multitude of permutations for the Trump-Xi G20 meeting outcomes. Given the array of possibilities, expect markets to be jittery and sensitive to these updates. The weekend APEC summit will also find leaders of US and China in attendance, with China’s representative being President Xi Jinping himself. Look to any fresh developments for the market open on Monday. Perhaps of less concern for markets in Asia, but the brewing Brexit tensions will likely remain in focus next week.

Economic data watch

Besides the known unknowns above, it remains a data week for markets, albeit a light one. From the US, we have seen October CPI largely falling in line with consensus and doing little to move markets just as Fed chair Jerome Powell’s comment this week encircled the similar theme of positive economic conditions and gradual rate hikes. Amid a scarce data calendar, the updates of housing start, durable goods orders and existing home sales are to be followed for any surprises. For the US dollar index that had counted on the inflation acceleration to rally ahead, the slump in crude prices had resulted in some pullback. Still, prices are seen to be in an uptrend with some sense of a bearish divergence. Look to where prices would be taken in the week ahead with European developments to play a big part here as well.

US dollar index

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Source: IG

Over in Asia we are also finding an emptier data docket. Japanese releases including October’s trade and inflation updates are expected though unlikely to be major market movers. A deterioration in Japan’s October trade balance is seen following the paring of Q3 growth. Meanwhile, the first of Q4 inflation reading will likely find October’s core CPI holding steady at 1.0% year-on-year, creating little impetus for market movements. Note that Bank of Japan governor Haruhiko Kuroda speaks on Monday. Reserve Bank of Australia’s November meeting minutes will also be released on Tuesday.

For the local Singapore market, the final reading of the third quarter GDP will also be due in the coming week along with the October CPI number. The backward looking growth data will unlikely have significant impact for markets. Look instead to external lead per usual for drivers to sway the local STI.

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