The curious trend this week had most likely been the improvement in risk sentiment despite the latest exchange of tariffs between US and China. Early declines in global equity markets in anticipation of President Donald Trump’s announcement for the tariffs on $200 billion worth of Chinese imports were erased into the end of the week with the relief that sets in. This had been bolstered both from continued hopes for trade talks between the two countries and for further policy support from the Chinese authorities. Meanwhile, confidence in the US economy remained at its heights as with earnings growth expectations shimmering ahead of the October Q3 earnings season start – FactSet’s polls currently points to a 19.9% earnings growth figure for Q3.
That said, the watch is on into the end of September as to whether trade talks between the US and China will eventually materialise, and the likelihood of President Donald Trump in realising earlier threats to take current tariffs levels further to the next $267 billion worth of Chinese goods. These will be the uncertainties mixed with the Fed meeting and data releases into next week. For the elevated bond yields and USD/JPY havens, these will be the essentials.
Fed FOMC status quo
The September FOMC meeting will unfold between 25 to 26 September with little elements to surprise expected. A 25-basis points rate hike had long been the consensus for September and will unlikely generate any reactions. It is the summary of economic projections that will always be worth a second look. The addition of the new Fed members including vice-chair Richard Clarida will find new points of reference in the interest rate projection dot plot. Changes could also be seen in the growth projections in light of the above consensus performance in various indicators seen of late, potentially bolstering the near-term view. Watch any changes here that could potentially support further lifts in yields that could give the greenback a jostle following this week’s losses.
Other economic data worth watching includes September’s conference board consumer confidence index on Tuesday and the final reading for Q2 GDP on Thursday before the personal income and spending results on Friday for August.
Amid a light data week for Asia markets, the spotlight falls upon Chinese figures with both September’s Caixin manufacturing PMI and the official figure expected in the week. The private Caixin gauge will be released on Friday with the market once again penning in expectations for a drop to 50.4 from 50.6 in August. Smoothing the data out on a rolling 3-month average basis, the downtrend had certainly been established since February this year and the upcoming release may well be one to contribute to the trend for this leading indicator, one to weigh in for Asia markets. The number will be measured against the official PMI due after the market close on Sunday, though once again the expectations are not on the improving end. Watch for ensuing impact.
For the local Singapore market, August’s CPI and industrial production will be seen in the week on Monday and Wednesday respectively. The local STI had exhibited a substantial recovery into the latter half of the week with the leap back above the 3200 handle that would likely serve as a support in the coming week above the 3114 stronghold.