Asia week ahead: Fedspeak, Japan and China data

By no means does Asia pale in comparison with key items due from China and Japan to punctuate the week.

US focus

September’s Federal Open Market Committee (FOMC) meeting had highlighted the divergence in rate hike views between the US central bank and the market. The Fed’s forward guidance, from dot plots to Federal Reserve chair Janet Yellen’s comments, had worked its way in reconciling some of the differences. While the currency market captured the reaction, US equity markets had mostly been unperturbed by the persistence in Fed hawkishness, supported by broad confidence and expectations for upcoming tax reforms. Nevertheless, the focus on the US has been tuned up and next week will give us ample drivers to watch.

On the policy end of matter, next week would could find the market examining developments on both monetary and fiscal policy ends. Federal Reserve board members, including chair Janet Yellen and Lael Brainard, will take to the podiums and touch on topics including inflation, labour market and monetary policy. Additionally, New York Fed President William Dudley, a known hawk, will also speak on Monday. Comments would be pared by market participants for justifications of their recent hawkishness and their longer-term outlook.

As promised by house speaker Paul Ryan, the incoming week also brings with it the outline of the much-anticipated tax reform plans. The concern would be how equity markets may be impacted should we find a negative turn of events. Other data to watch in the US includes a third reading for US Q2 GDP numbers and August’s core PCE update, among others.

The amalgamation of the abovementioned US leads is also expected to play a key role in guiding Asian markets. This week has seen Asian markets coming under pressure post Fed FOMC meeting as the tightening bias squeezed emerging market stocks and currencies. Besides more Fedspeak, next week’s tax policy plan could have a corresponding effect upon regional markets.

Asia indicators

Following the Bank of Japan (BoJ) meeting, where both the monetary policy and a rosy economic outlook had been maintained, the focus in Japan may fall squarely upon the set of data due Friday. While the BoJ continue to recognise that inflation remain a distance from their targets, August’s inflation rate could be a step forward in the right direction, expected to tick up from the previous 0.4% year-on-year reading in July. This would be an item that could further play to the US dollar strength against the JPY. August jobless rate, retail sales and industrial production will also be due Friday while the BoJ’s July meeting minutes comes early on Tuesday.

For China, it will also be a big week and the only week prior to the week-long Golden Week holidays. With the break, the market may be exceptionally susceptible to outflows from retail investors, which could weigh upon price performance. Regional markets, meanwhile, will look for cues from early September releases in China. The Caixin manufacturing PMI numbers will be unveiled on Friday ahead of the official data due Saturday, setting some early expectations for September’s manufacturing performance. 

Besides the abovementioned, Tuesday’s RBA minutes release the Bank of Thailand’s meeting will be key central bank items to watch during Asia hours. For the local Singapore market, eyes would land on August’s CPI and industrial production in the step up towards next month’s MAS meeting.