Asia week ahead - Fed minutes, China data

The uncertainty certainly persists, though one can count on the most recent Fed meeting’s minutes and China’s data barrage for drivers next week.

Fed minutes

The September Federal Open Market Committee (FOMC) meeting minutes will be released next Wednesday that could intensify the discussion surrounding yields and be prevalent for global equity markets. The sell-off in the bond market, as if investors finally woken up to the Fed’s idea of a gradual interest rate hike plan, were seen triggered last week with data surprises in the US. This had in turn, tilted global equity markets south. Elevated yields continued to weigh on equity prices, though a more severe turn was seen this week following the coalescence of multiple stressors for equities. Over and above the uncertainty over US and China trade tensions, particularly with new Chinese hardware hack, President Donald Trump’s criticisms of the Federal Reserve had been destabilising for the market.

The 25-basis points hike coupled with the largely unchanged economic projections had largely been consistent with expectations, though investors could dive in on the reasons behind the removal of the “accommodative” description in their meeting statement that Fed Powell had to clarify regarding. The debate on the “neutral” interest rate uncertainty aside, views from FOMC members regarding the surpassing of this level could also be a bane for equities, one to note. In turn, yields and the USD may find further room to go after stalling into the end of the week. Key data such as retail sales and industrial production would play a part as well.

With the above said, we do also have a series of earnings to watch with approximately 10% of the companies on the S&P 500 index due to report their Q3 performances. Early reactions towards major bank earnings this Friday have yet to be seen, though the recovery in US futures going into the session certainly reflects some sense of anticipation. Arguably, the growth outlook has grown more blurred of late with warnings from even the IMF just this week, but any positive reinforcement from guidance could still support markets.

The breach of the 200-day moving average on the S&P 500 certainly captured attention on Thursday. Technically, however, prices have found support from the longer-term uptrend, which would make price action from here crucial in determining the direction. This is likewise for the influence upon Asia markets.

S&P 500