Markets Insights

Data, trade war news to continue driving markets

Democratic House Speaker Nancy Pelosi holding a news conference in Washington this month. The US' partial government shutdown has extended into a fifth week and remains at an impasse. Mrs Pelosi plans to have the House vote on its own border security
Democratic House Speaker Nancy Pelosi holding a news conference in Washington this month. The US' partial government shutdown has extended into a fifth week and remains at an impasse. Mrs Pelosi plans to have the House vote on its own border security plan, which she said will not offer new funding for the border wall that President Donald Trump wants but may help reopen negotiations on his demands.PHOTO: EPA-EFE

China's GDP figures, CPI data of HK and S'pore among highlights

Economic data will be the focus for Asian investors this week, with highlights including China's gross domestic product (GDP) figures and last month's consumer price index (CPI) numbers from Hong Kong and Singapore.

China's GDP figures for the last three months of last year to be released today are expected to confirm indications from recent trade data that its economy is slowing.

IG market strategist Pan Jingyi said the data will likely meet the current consensus for a 6.4 per cent year-on-year rise, slowing slightly from 6.5 per cent in the third quarter. That is, unless the industrial production and retail sales data also due today disappoint, which would add to downside risks, she said.

Hong Kong releases its December CPI numbers tomorrow, followed by Singapore on Wednesday. Japan will unveil its inflation figures for this month on Friday.

FXTM research analyst Lukman Otunuga said: "As Asia looks to domestic consumption to offset weaker global demand, inflationary pressures may weaken local consumer sentiment."

A few central banks are scheduled to announce monetary policy decisions this week, including the Bank of Japan on Wednesday and the European Central Bank (ECB) and Bank Negara Malaysia, both on Thursday. None of the monetary policy committees is expected to issue changes, Ms Pan and Mr Otunuga said.

But Mr Otunuga said investors will scrutinise the ECB press conference for "insight into the health of the European Union economy and clues on monetary policy".

United States stock markets are closed today for Martin Luther King Jr Day. The country's partial government shutdown has extended into a fifth week and remains at an impasse, even as President Donald Trump presented his latest proposal for ending it in a televised address to the nation last Saturday.

In exchange for the US$5.7 billion (S$7.7 billion) he wants for a border wall, Mr Trump offered concessions such as three-year extensions to protections including temporary protected status (TPS) under the Deferred Action for Childhood Arrivals (DACA) policy for people brought to the US illegally as children.

Senate Majority Leader Mitch McConnell said he would have the Republican-controlled Senate vote on the plan this week, but Democratic leaders indicated that they would reject it.

"It was the President who single-handedly took away DACA and TPS protections in the first place," said Senate Democratic Leader Chuck Schumer. "Offering some protections back in exchange for the wall is not a compromise but more hostage-taking."

Democratic Speaker of the House Nancy Pelosi plans to have the House vote on its own border security plan instead, which she said will not offer new funding for the border wall but may help reopen negotiations on Mr Trump's demands.

On the US-China trade war front, it comes as no surprise that news from the ongoing negotiations is expected to continue driving markets for the rest of this month, with the key event being an end-of-month meeting in Washington.

News that drove markets last Friday included a Bloomberg report that China had offered to raise goods imports from the US by over US$1 trillion over the next six years to cut its trade surplus to zero by 2024. US stocks extended gains and the US dollar rose following the news.

The report added that US negotiators were sceptical and asked that the imbalance be rectified within two years instead. But economists are doubtful that it is even possible to completely eliminate the trade gap, as it is largely sustained by US demand for Chinese products.

A version of this article appeared in the print edition of The Straits Times on January 21, 2019, with the headline 'Data, trade war news to continue driving markets'. Print Edition | Subscribe