Asia week ahead: US CPI, China returns

It had been a strong week for equity markets as the riskier asset class gained favour on reaffirmed growth momentum in September. US indices, and specifically the S&P 500 index, certainly exhibited a strong trend. Posting its eighth consecutive session of gains on Thursday, the S&P 500 index saw its longest winning streak since 2013. Over and above the jubilance in US markets, we have certainly seen regulatory changes in China lending a hand to regional markets in the absence of its domestic trade.

Earnings, Fed minutes, CPI mambo jumbo 

The raging rally in the US may still have further upsides to run in the coming week as we break into the earnings season. Leading the crowd in the coming week would be US bank earnings including JPMorgan Chase & Co. and Citigroup Inc. on Thursday. An outperformance of the lowered Q3 earnings expectations would serve another jolt to the current strong trend. Conversely, disappointments here could also send a disproportionate dent to the elevated prices, though the bias is for otherwise.

Besides the equity market, the US dollar may also find strength in the coming week with the September Federal Open Market Committee (FOMC) meeting minutes and CPI figures in tow. September saw the first monthly gains for the USD index in seven months, supported primarily by the hawkish monetary policy views derived from the Fed’s meeting.

While the debate over the balance sheet tapering settled, investors would likely parse the minutes, picking on the Fed’s thoughts over economic conditions and ensuing monetary policy plans. This could potentially refresh bullish bets for the US dollar. Not to forget, as with the previous release, September’s hurricane-marred CPI numbers may also provide support for the USD index with an acceleration expected. Barring surprises from tonight’s non-farm payrolls, the 95.0 figure comes into view for the USD index.

Asian indicators

Asian markets would see the return of China in the week ahead, a market that is expected to catch up to the gains seen in the rest of Asia. Besides the strong official PMI numbers released after onshore markets closed for the Golden Week holiday, the amendment of banks’ reserve ratio will also be reasons for the Chinese equity market to charge ahead. Several data releases are also expected with China’s return and the notable item in the week ahead would likely be September’s trade numbers. The market has currently penned in a consensus for an acceleration to exports growth which may provide a boost for regional markets.

For the local Singapore index, there would however be an intensified focus on growth with Q3 GDP’s advance estimate expected in the week, timing to be confirmed. The release is expected to be accompanied by the Monetary Authority of Singapore’s decision, where the majority holds the view that it will remain unchanged with a less dovish tone held in forward guidance. This could leave both the STI and USD/SGD to be driven primarily by the Q3 GDP figure and external influences. Watch for a lift that could come with the realisation of an acceleration to growth for Q3.