Asia market week ahead - Fed minutes, China data

Market recap: Positive start to Q2

Q2 had a positive start thus far with global equity markets continuing the rally on abating growth worries and positive sentiment towards US-China trade. US 10-year treasury yields, the weather vane of growth concerns, had edged back to a 2-week high, lifting the gap with the 3-month yields to 10 basis points. The synchronized surprise in manufacturing PMIs out of China and US had a significant part to play while trade hopes with China hailing ‘new consensus’ at the end of the week which also helped to boost sentiment.

Meanwhile on Brexit, GBP/USD had been a testimony to the uncertainty that prevails, counting down to the next date of interest on 12 April for any further delays to Brexit. As it is, all the options remain on the table and certainly so does the possibility for an even longer delay as news highlights the 12-month ‘flexible delay’ from the EU council. Watch for any breakouts here in the coming week with EU leaders also holding an emergency Brexit summit midweek.

Fed minutes and inflation

The key focus in the coming week for global equity markets will be both the March’s Federal Open Market Committee (FOMC) meeting minutes and CPI data out of the US.

The Fed had surprised on the dovish end in the March meeting, providing a lift for equities with their median consensus for no further hikes this year among others. In light of the mixed data out of the US at the start of the year, the Fed would likely be unanimous in agreeing on the ‘patient’ stance in the minutes. Details of the balance sheet reduction will nevertheless be watched. More importantly, however, it will the consideration from Fed members on the next move that will be scrutinized given the increasing market perception of an interest rate cut being the next Fed policy change. Watch for repercussions on the USD and Wall Street.

Ahead of the Fed minutes release will be March’s CPI with the current consensus pointing towards an acceleration in price growth. Headline CPI is expected to come in at 0.3% month-on-month (MoM) while core CPI is due to rise to 0.2% MoM from February’s 0.1%. No surprise a slight uptick would be registered in light of the lift in energy prices among others into March. Other data due in the week includes Friday’s preliminary April reading of the University of Michigan sentiment. The European Central Bank (ECB) meets as well next Wednesday with no changes expected to their view on keeping rates unchanged ‘at least through the end of 2019’.

Asia indicators

Following the PMI surprises out of China, Asia markets will also be looking to the release of China’s March price inflation and trade figures. Both the price producer inflation and the exports readings are expected to trend alongside the manufacturing PMI to reflect more robust factory activity after the Chinese New Year period. March’s PPI is expected to rise to 0.5% year-on-year (YoY) while the consensus for exports is at 7.3% YoY, reversing from the -20.8% disappointment in February.

For the local Singapore market, it will be a big week with the advance estimate of Q1 GDP and the Monetary Authority of Singapore (MAS) monetary policy decision due on Friday. The MAS is widely expected to keep rates unchanged while the Q1 GDP could slow to 1.5% YoY according to market consensus. SGD pairs and the local market would be watching the Q1 GDP update and the MAS statement for trade into the end of the week.

Read our April Monetary Authority of Singapore (MAS) meeting preview here.