Markets Insights

All eyes on US-China trade talks

Cautious mood likely this week; data from China, Japan, Britain and US also in focus

Markets in Asia return for a first full week of trading this month after last week's festivities.

Key events this week include a number of data releases in China, the possibility of another United States government shutdown and British Prime Minister Theresa May's revised Brexit deal.

But the one likely to garner the most attention is the trade talks in Beijing between the US and China.

Last week was characterised by relatively cautious trading as concerns about global growth and geopolitical risks, as well as rekindled US-China trade tensions, continued to weigh on investors' minds.

FXTM research analyst Lukman Otunuga expects this overhang to carry over to the new week. He said: "Global equity markets may remain vulnerable to downside shocks as robust corporate earnings are overshadowed by trade tensions and growth fears.

"With the deadline to the 90-day US-China trade truce slowly approaching, markets will most likely be highly reactive and volatile to trade developments."

DOWNSIDE RISKS

Global equity markets may remain vulnerable to downside shocks as robust corporate earnings are overshadowed by trade tensions and growth fears. With the deadline to the 90-day US-China trade truce slowly approaching, markets will most likely be highly reactive and volatile to trade developments.

FXTM RESEARCH ANALYST LUKMAN OTUNUGA

This is likely to keep investors interested in defensive plays like Singapore Reits and Asian dividend stocks, DBS Bank chief investment officer Hou Wey Fook said in a note last Friday.

In its weekly outlook, the UOB global economics and markets research team said there will be a focus in Singapore on "the news flow regarding the FY2019 Singapore Budget on Feb 18".

Last Friday on Wall Street, equity benchmarks managed to shake off scepticism over the two largest economies reaching a trade deal before the March 1 deadline as corporate results continued to be largely positive.

The Dow Jones Industrial Average fell 63.2 points, or 0.25 per cent, to 25,106.33; the S&P 500 gained 1.83 points, or 0.07 per cent, to 2,707.88; and the Nasdaq Composite added 9.85 points, or 0.14 per cent, to 7,298.20. For the week, the Dow added 0.17 per cent, S&P 500 rose 0.05 per cent and Nasdaq gained 0.47 per cent.

While the Singapore economic docket is almost empty for the week, with December's retail sales figures due tomorrow, China's return from the week-long Chinese New Year break today will spell a busy week for data releases.

In China, trade, inflation and foreign reserve figures for last month are due. In particular, attention will be paid to Thursday's trade numbers from the first month of 2019, with exports likely to continue their year-on-year declines.

IG market strategist Pan Jingyi said this serves as "a fresh reminder of the ailments the country continues to face amid tariffs imposition and the broad slowdown".

Elsewhere in Asia, investors are likely to take direction from Japan's fourth-quarter gross domestic product (GDP) numbers due on Thursday.

"While the sentiment remains rather mixed towards the Japanese market, Q4 GDP could be one to show some respite, expected to revert to growth after a weak Q3 period," said Ms Pan.

Fourth-quarter GDP figures for Malaysia, India and Taiwan are due this week too.

In Britain, where Mrs May aims to get the House of Commons' approval for her revised Brexit deal by Wednesday, GDP, inflation and retail sales data will be released this week.The US will also release the same set of data this week.

Japan's markets will be closed today for the National Foundation Day holiday.

A version of this article appeared in the print edition of The Straits Times on February 11, 2019, with the headline 'All eyes on US-China trade talks'. Print Edition | Subscribe