Asia week ahead - relief for markets?

The gradual dissipation of negative sentiment unfolded this week with the US’ proposal for trade talks with China partially effecting the change.

Source: Bloomberg

Markets that had weak leads include tech woes to chew on at the start of the week also saw tech stocks rebounding towards the end of the week aiding in the recovery. That said, uncertainties with regards to politics remain the case as we move deeper into September.

Trading trade tensions

The narrative on trade finally saw a turn in direction this week with the prospects of trade talks between US and China alleviating the jitters for a market anticipating fresh tariffs on $200 billion worth of Chinese goods. Interests from the Chinese authorities to deflate the trade woes that had been hurting the country’s stock market and currency were evident via their efforts to set up meetings with Wall Street executives, set to unfold this weekend. That said, the success of trade talks in the later part of September remains a question particularly with the hard stance that President Donald Trump continue to hold despite the offer for talks. The flopping of past talks in recent memory would make one cognizant of the heightened volatility we could still be seeing from the oscillating sentiment surrounding this item. With this backdrop, look to developments on the formulation of these talks to help drive the market. As it is, US markets have certainly found upsides into the end of the week while many Asian markets reversed ahead of key support levels though the downtrend for most Asian markets have yet to be de-established.

S&P 500

Bank of Japan meeting

The only advanced economy central bank meeting to watch for next week would be the Bank of Japan(BoJ) meeting, although alongside the European Central Bank meeting this week, no expectations are in place for changes to come by. July’s meeting saw the central bank adding the commitment to keep current low rate policy for “an extended period of time” suggests that indeed we might only find changes delayed through to even 2020.

Running alongside the release of the BoJ meeting and worthy of the market’s attention may however be the trade and inflation data on Wednesday and Friday respectively. Expectations are for the core CPI reading to tick up to 0.9% year-on-year from 0.8% previously, riding primarily on the one-off hotel charges boost. Any surprises, however, would be watched for implications alongside the impact from US data to move the USD/JPY pair which have been showing a bullish trend.


Economic indicators

Given the US dollar weakness post the disappointment in US inflation numbers, incoming releases will be watched for as to whether they would cement the head-and-shoulder pattern for the US dollar index. Admittedly there are little tier-1 items to watch mid-month, though the likes of housing starts, building permits and existing home sales could still offer some direction. Notably, Friday would see the preliminary Markit manufacturing PMI numbers for the month of September that would give an early indication of the manufacturing activity for the month, one to note for the Eurozone and Japan as well.

Over in Asia, other than Japanese indicators, the Bank of Thailand will be deciding rates with no changes expected. Inflation numbers will continue streaming in from Malaysia and Hong Kong in the Asia region. For the local Singapore market, the key release will be August’s non-oil domestic exports numbers on Monday.

US dollar index

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