5 things to know before the Singapore market trades this week: July 27-Aug 2

Federal Reserve Board chair Janet Yellen.
Federal Reserve Board chair Janet Yellen.PHOTO: AFP

1. All eyes on Fed rate decision and US Q2 GDP

With Greece's debt saga on the back-burner, all eyes will be on the US this week.

The Federal Reserve's rate-setting Open Market Committee when it meets on Tuesday and Wednesday, with a decision scheduled to be announced, Singapore time, at 2am on Thursday. Economists do not expect a rate rise until September when the US central bank plans a news conference, unlike July when only a statement is planned.

Fed chair Janet Yellen has warned, however, that "every meeting is live", with a decision possible at any time.

The policymakers will probably already have a steer on US gross domestic product in the second quarter, a first estimate of which will be published on Thursday. The economy is seen returning to growth, of 2.7 per cent, after a contraction in a weather-hit first three months.

Weak retail sales and a disappointing jobs report in June and May's sharp drop in business confidence have raised concerns the world's biggest economy is slowing. But a fifth monthly rise in consumer prices in June and strong housing data could support a monetary policy tightening. The Fed pinned its benchmark federal funds rate near zero since December 2008 to spur the economy.

2. Taking China's weak pulse again

The overall health of the Chinese recovery should become clearer after official National Bureau of Statistics PMI data for both manufacturing and services on Saturday.

Friday's flash Caixin/Markit PMI showed activity in Chinese factories contracted for a fifth consecutive month and by the most in 15 months in July, sending gold to a five-month low and copper to a six-month trough.

3. Singapore's Big Three banks report Q2 earnings

DBS kicks off the reporting season for the second quarter on Monday, with UOB and OCBC due on Friday. The Big Three are expected to report a slight increase in profits for the second quarter.

The benchmark lending rate, the Singapore Interbank Offered Rate or Sibor, has doubled since the start of this year, to about 0.82 per cent, with banks enjoying higher loan margins as they reprice their Sibor-pegged loans.

But analysts say banks' interest income were probably hurt by slowing loans growth, higher cost of deposits and shrinking trade finance, particularly for the China market.

Credit rating agency Moddy's raised its outlook for Singapore's banking system to stable from negative earlier this month, citing the property market's "soft landing", but it aslo noted that profitability will decline due to higher credit costs and slower loan growth.

For the first quarter, all three banks reported earnings that were in line with or beat expectations. DBS posted record net profit of $1.27 billion, up 3 per cent year-on-year. OCBC booked a 11 per cent rise in net profit to $993 million while UOB said profit grew 1.6 per cent to $801 million.

4. Overseas earnings to watch

The corporate world enters the busiest part of earnings season next week. In Europe, Swiss bank UBS and oil giant BP report on Tuesday, with Barclays, RBS, Deutsche Bank and Shell reporting later in the week. In the US, drug makers Pfizer and Merck along with tech darlings Twitter and Yelp will release results Tuesday. Later in the week, Facebook, Procter & Gamble and Exxon are among the bigwigs releasing earnings.

5. UK Q2 GDP expected to show recovery

In Britain, data on Tuesday is expected to show Europe's second-largest economy recovered from a surprise slowdown in early 2015 and grew by a quarterly 0.7 per cent in the April-June period, back to the kind of pace seen at the end of last year.

Britain is on course to expand at a faster pace than other rich economies for a second year in a row but its recovery remains heavily reliant on consumers, rather than manufacturers.

A widely watched consumer confidence survey out ...is predicted to show optimism dipping slightly in July but remaining close to its highest levels in more than 15 years. Data from the Bank of England on Wednesday is expected to show mortgage approvals hitting their highest levels in more than a year.

Sources: Reuters, Wall Street Journal