The week ahead retains the focus upon the Fed with the highlight being Federal Reserve Chair Janet Yellen’s semi-annual Monetary Policy Report to Congress.
Market recap
Geopolitical concerns, bond rout and a reversal for crude oil prices were just some of the items weighing upon the equity markets this week, landing most Asian indices in week-to-date (WTD) declines. Adding to the pressure for markets had been the weaker than expected private ADP payrolls data that sets a soft tone for the non-farm payrolls (NFP) release tonight. With inflation numbers still lacklustre, the US labour market conditions would have to hold up for investors to maintain their faith with the Fed’s hawkish push for monetary policy.
Price movements in the past week had been a prime example of highly sensitive markets, especially towards any downturn in sentiment. A look into regional markets sees Hong Kong’s Hang Seng Index shedding 1.5% WTD, unable to claw back losses after the sell-off on Tuesday that had been triggered by North Korea’s successful firing of its intercontinental ballistic missile. Meanwhile the local STI briefly plunged to the 3200 handle, flirting with the key support. Nevertheless, only a slight fraction of the year-to-date gains had been erased this week and the market is very likely looking ahead to the next lead for inspiration.
Fed Yellen’s testimony
This week’s Federal Open Market Committee (FOMC) meeting minutes release yielded little reaction from the markets, pushing the spotlight to next week’s testimony to Congress by Federal Reserve chair Janet Yellen for further clues on Fed think. Similar to the Fed’s minutes, the moving puzzles remain with the inflation outlook and the Fed’s balance sheet reduction plan. Fed chair Yellen’s words will be scrutinised for mentions of the above.
Additionally, we also have a series of Fed speakers lined up while key data slated for release in the upcoming week includes consumer and producer price inflation and retail sales numbers. An acceleration of retail sales growth has been penned in by the market for the month of June. Hawkish anticipation of the Fed views and improvements in economic performances could place the bias on the upside for the US dollar in the coming week.
Asian indicators
Asian markets are expected to find a relatively packed week ahead with several key releases from the region. Notably, China will also be updating their consumer and producer price inflation and their trade figures. Regional markets, having been battered in the week, could look ahead to trade figures for a jab of optimism with Chinese exports expected to sustain with the positive performance.
Meanwhile, central bank meetings expected in the region includes Bank Negara Malaysia (BNM) and the Bank of Korea (BoK). Both central banks are expected to keep rates unchanged and keep to a positive tone on economic outlook, in line with the region.
The local Singapore market could see all eyes on the advance estimate for Q2 GDP, slated for release between 10th to 14th July. A mild acceleration has been penned in for year-on-year growth at 2.8%, while quarterly, GDP is expected to revert to growth. Positive growth momentum at the start of the year has contributed to upsides on the local bourse and any significant deviation from the market consensus could certainly carry through to stock market movements.
