Markets Insights

Brexit, US-China trade deal, China data updates in focus

China data due for release this week in the mainland includes Thursday's January-February retail sales, fixed asset investment and industrial production figures.
China data due for release this week in the mainland includes Thursday's January-February retail sales, fixed asset investment and industrial production figures.PHOTO: REUTERS

Domestic attention likely also to be on increasing risk of weakening global outlook

Recent data releases and cuts in economic growth forecasts are representative of a weakening global growth outlook.

Against this backdrop, markets will also be looking to updates on the US-China trade deal, more Chinese data releases during the second week of China's National People's Congress (NPC), and the Brexit vote this week for leads.

Last Friday, a weak jobs growth report ignited concerns on the state of the global economy, sending Wall Street's three key benchmarks lower. The Dow Jones Industrial Average closed 0.1 per cent lower at 25,450.24, the S&P 500 slipped 0.2 per cent to 2,743.07, and the Nasdaq Composite Index dropped 0.2 per cent to 7,408.14.

Although some of the intraday declines were small, Wall Street benchmarks ended lower on each of the five trading days of last week.

It was the US market's weakest showing of 2019 so far.

While the job numbers missed expectations, Charles Schwab Singapore managing director Greg Baker said that the United States labour market remains tight and overall wage growth is on the rise.

He noted that the US economic outlook remains strong relative to the rest of the world.

"Yet, if wages continue to rise, filtering through to the broader economy, the Fed could be forced to step back in - not to move to neutral, but rather to tighten, in order to battle a perceived inflation threat. This is a risk likely overlooked by investors, even though it could contribute to greater volatility."

The Singapore economic docket remains very light, with just January's retail sales figures due tomorrow. In its weekly outlook, the United Overseas Bank global economics and markets research team said that with Parliament ending last Friday, attention on 2019 Budget measures may recede this week.

The domestic focus will likely be on the increasing risk of the weakening global growth outlook, trade uncertainties and Brexit developments, the bank said.

In China, as the second session of the 13th NPC continues, a key focus for investors and market watchers is on what the draft foreign investment law would entail.

UOB said that it will be important to see whether some of the demands from US trade negotiators are addressed.

These include technology transfers, market access and foreign investment in restricted sectors, and changes to Chinese industrial policies. The NPC concludes on Friday.

China data due for release this week in the mainland includes Thursday's January-February retail sales, fixed asset investment and industrial production figures.

FXTM global head of currency strategy and market research Jameel Ahmad said: "With the Chinese yuan being Asia's best-performing currency so far in 2019, gains in the currency may follow any positive surprise in the upcoming week's data announcements, which would also go some ways towards alleviating concerns surrounding China's economy."

The Bank of Japan (BOJ) has a monetary policy decision to make on Friday with dovishness expected to remain.

The projected weaker growth of Japan and the likelihood of downside price pressures may present further challenges to the BOJ's monetary policy in 2020.

The British Parliament will vote on Prime Minister Theresa May's revised Brexit draft deal tomorrow.

If the deal fails to pass, there will be a vote on a no deal the next day.

IG market strategist Pan Jingyi said: "Amid all the growth concerns, the last thing we may perhaps be needing at this point of time will be further political noise surrounding Brexit."

A version of this article appeared in the print edition of The Straits Times on March 11, 2019, with the headline 'Brexit, US-China trade deal, China data updates in focus'. Print Edition | Subscribe