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Asia week ahead - US-China meeting resumes

With a good part of Asia markets having been away for pockets of the week, it does appear that we have had a relatively quiet week amid the mishmash of events.

Once again, the same may not be said for the coming week, particularly with the US-China negotiations to continue in Beijing.

US-China high level meeting in Beijing

The rhetoric going into the next round of meetings between high-ranking officials from US and China had not been the most agreeable for markets, raising the stakes with this next avenue of update. Treasury secretary Steven Mnuchin and trade representative Robert Lighthizer are expected to return to Beijing next week to continue negotiations in the countdown to the March 1 deadline for a deal. Certainly, President Donald Trump’s latest suggestion of the ‘highly unlikely’ meeting with Chinese President Xi Jinping in the coming weeks to close a deal had dampened sentiment into the end of the week. That said, in this twist and turn of events, it may be difficult to know if this had again been posturing, thus lifting the importance of next week’s meeting.

One should not be too surprised if we again yield little from the meeting, though it will be the next steps that will be important with two weeks left to the deadline by Friday. As far as markets have suggested following President Donald Trump’s comments this week, US-China trade relations remain top of concerns as prices trudge on in consolidation awaiting directions. An agreement for further talks, barring comments on on-going discussions, would render the status quo situation for markets.

Checking US growth

Separately, as European growth outlook dims, the watch on US growth trajectory continues. Certainly, we have now known with the reopening of the US government this week that Q4 GDP reading will be delayed to end-February, but items including the delayed retail sales would play a part in guiding trade next week. Among the ones to watch will be December’s retail sales and January CPI and industrial production figures. The preliminary University of Michigan’s sentiment for February will also be in the lot.

Amongst which, the one to pay close attention to will be retail sales for a gauge of December’s consumer spending. The control group, which feeds into the GDP itself, is expected to slow and could act as a weak leading indicator, potentially dragging upon markets, one to watch. On January’s CPI, core inflation is expected to remain unchanged at 0.2% month-on-month, whereupon realization would render little changes in perception towards the data-driven Fed’s outlook to hold rates.

Notably, into Friday, we would also have US government shutdown potentially returning to haunt the market. To a large extent, the impact of a prolonged government shutdown had been recognized as one to weigh on growth and a repeat would certainly not be welcomed. That being said, we have heard President Donald Trump holding to his border wall promise in this week’s State of the Union speech that could complicate matters.

Asia economic indicators

Among Asia indicators to watch this week would be Chinese data once again as the country returns from the week long Chinese New Year celebrations. January’s trade, inflation and foreign reserves figures have been queued. Specifically for trade numbers, exports are expected to continue showing year-on-year declines that would be a fresh reminder of the ails that the country continue to face amid tariffs imposition and the broad slowdown.

In addition to the above, Japan’s Q4 GDP will be a highlight for markets. While the sentiment remains rather mixed towards the Japanese market, Q4 GDP could be one to show some respite, expected to revert into growth after a weak Q3 period. Other tier-1 data expected in the region includes inflation readings across India, Taiwan and Malaysia’s Q4 GDP as well.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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