Asia Week Ahead: Massive week for markets

Recap of the week

We have certainly seen some of the bearish sentiment, which lingered from last week, reversing through the course of the week. The failure to pass the healthcare reform vote by the new US administration had dealt a blow to the market’s confidence in President Donald Trump and his unfulfilled promises at the start of the week.

This gloom, however, soon cleared as the market zoomed in on US data. March’s conference board consumer confidence data and the final reading of US Q4 GDP had both exceeded expectations, broadly lifting markets and feeding the reflation trade.

As Wall Street looks set to close the week in gains, the dollar index had made some of its own progress. From sub-99.00 levels at the start of the week, the USD index bounced and traded on either side of 100.50 in Friday’s Asian session. The upcoming week appear to promise more of its own support for the USD. 

NFP week

Certainly, we are a good distance away from the next Federal Open Market Committee (FOMC) meeting on 2-3 May, but March’s update on labour market conditions remains one of high importance in driving monetary policy expectations. Against the backdrop of policy uncertainties from the new US administration, economic data is expected to play a key role in influencing trade. The market is currently expecting March’s non-farm payrolls (NFP) data to increase 174k according to Bloomberg’s consensus. This would be a moderation from the stellar 235k printed in February, but would remain telling of labour market robustness.

In addition to the above, we would also find March’s Fed FOMC meeting minutes released midweek, expected to shed light into the hasty but steadily put together lift off in lending rates. Although we have already heard updated views from a series of Fed officials, any new insights could remain market-moving ones. Concrete support of the Fed’s considerably dovish turn post-meeting could dampen both the currency and equity markets alike.

Perhaps all eyes would be on the first meeting between the current leaders of US and China. President Donald Trump is expected to host President Xi Jinping at Mar-a-lago between 6-7 April. The relationship between the world two largest economies had been marred with unsettling differences since President Donald Trump took office. These differences had also stalled gains for Asian markets in the early days after President Donald Trump won the elections.

Although both parties had kept mum on the agenda for the meeting, the market is expecting trade issues to be on the list. Prior to the meeting, we have heard from US President Donald Trump taking to twitter to express his view that the upcoming meeting is expected to be ‘a very difficult one’. This perhaps adds on to the importance of this meeting and any animosity created could perhaps dent markets on both ends.

Asian indicators

China’s official PMI figures had surprised on the upside on Friday while the upcoming week brings the private Caixin gauge. Perceived to be a more transparent measurement, the Caixin manufacturing PMI is expected to hold steady at 51.7 and would be one to keep on the radar.

Monday marks the start to the month which coincides with Japan’s Q1 Tankan, or short-term economic survey of enterprises, release. The large manufacturer Tankan index is currently expected to improve to 14 from 10 in the last quarter, which could provide a boost for Japanese markets.

For the local Singapore market, other than the PMI figures due on Monday, Singapore’s first quarter GDP will also be expected any time between 7-14 April. A market consensus of 2.6% YoY had been penned in for Q1 GDP, sitting to the right of the 2.0% YoY full year growth expectation. For the local Straits Times Index which had touched rallied to a fresh high since 2015 this week, Q1 growth figures would be a key one to watch for in determining the near-term trend.