Asia week ahead - new year holidays

Market recap

One had perhaps not seen a week quite as busy as this week for some time. This is with items ranging from US-China trade talks, the Federal Open Market Committee (FOMC) meeting and US earnings such as Apple and Facebook dotting the week. While US-China talks in Washington yielded broadly positive rhetoric and little details once again, the dovish swing from the Federal Reserve had been the primary booster for global markets, aiding in the climb for equites. The Fed kept the ‘patient’ outlook on rates and alluded to the likelihood of an earlier end to their balance sheet tapering programme, laying to rest some of the near to medium term worries on tightening conditions aggravating an economic slowdown.

This saw to gains of over 7.0% for both the Dow and the S&P 500 index in January. Comparatively in Asia, the likes of the Hong Kong Hang Seng Index can be seen keeping the uptrend going in the escape from the consolidation since late last year. For the coming week, however, the relative quietness may instead see to more moderate movements within markets.

US Q4 earnings season check

Besides the Federal Reserve, a key driving force in the week had been earnings as the series of earnings releases including Caterpillar, Apple, Facebook and Amazon whipsawed markets. With approximately 43% of the companies on the S&P 500 index reported thus far yielding a 71% beat in earnings, a sense of resilience continues to be exhibited this earnings season.

As we move into the new week, a good 19% of the companies will be due next. This includes names such as Google’s parent company Alphabet and Twitter Inc. among others, certainly ones for the market to track for surprises and reactions.

Indicators to watch

With China market off for the week and the likes of Hong Kong and Singapore away over February 5-6, thin market trading across Asia is expected to be the case. This would also mean that fewer pieces of data will be due in the region with China only releasing their foreign reserve holdings in the week. Foreign exchange holdings are expected to have improved slightly in January with the currency gathering strength. Australia would nevertheless be kept busy with the RBA and December retail sales expected. Alongside the rest of the central bank meetings in the week in Thailand, UK, Philippines and India, no changes are expected.

While we have yet to receive updates on the slew of labour market updates in the US, the re-opening of the government is expected to provide delayed reports on November’s trade data, pertinent to interpretations towards the US-China trade issue. One for global markets to watch.