Markets Insights

Extended US-China trade talks in spotlight

US and Chinese officials at trade talks in Washington on Thursday. The talks have been extended by two days as both sides race to reach a deal before higher US tariffs for Chinese goods kick in on March 1.
US and Chinese officials at trade talks in Washington on Thursday. The talks have been extended by two days as both sides race to reach a deal before higher US tariffs for Chinese goods kick in on March 1.PHOTO: AGENCE FRANCE-PRESSE

Focus also on key data releases from US and Asian economies

Progress on the trade talks between the world's two giant economies will take centre stage this week, with meetings between the United States and China in Washington extended by two days as the parties race to reach an agreement ahead of the March 1 deadline.

US President Donald Trump is also set to meet North Korean leader Kim Jong Un this week in Hanoi, Vietnam, for a second summit on Wednesday and Thursday.

Investors should note that "there would be ample opportunities" for Mr Trump to make comments during Asia trading hours, said IG Markets strategist Pan Jingyi.

Mr Trump last Friday said he is likely to meet Chinese President Xi Jinping some time next month at his Mar-a-Lago resort in Florida.

He also told reporters that he thinks "there is a very, very good chance that a deal can be made" and he could extend the tariff truce deadline "if we are doing well".

US markets traded higher on trade optimism last Friday, but pared gains on reports that US officials think more time is needed to resolve the remaining issues.

Last Friday, the Dow Jones Industrial Average rose 0.7 per, while the S&P 500 added 0.6 per cent and the Nasdaq Composite jumped 0.9 per cent.

 
 
 

Ms Pan said regional markets will likely trade cautiously into the end of this week unless an extension to the truce is confirmed before the current deadline expires.

Federal Reserve chair Jerome Powell will appear before the Senate Banking Committee tomorrow and House Financial Services Committee on Wednesday to elaborate on the latest Fed report.

"Expect the US lawmakers to question on Fed's patient message and its intentions on its balance sheet in 2019," said UOB's Global Economics and Markets Research team.

The US will see several data releases this week, as government agencies clear the backlog caused by the recent government shutdown. These include fourth-quarter gross domestic product (GDP) figures and personal consumption expenditure price index figures on Thursday, and the ISM manufacturing index on Friday.

The GDP report will combine the initial and second readings, and expectations are for growth to slow to 2.5 per cent from 3.4 per cent in the third quarter, according to a Bloomberg poll.

Ms Pan noted that stock markets reacted negatively to disappointing December retail sales earlier this month, and a similar reaction with downside risks for the US dollar could result if the GDP figures fall short as well.

In Asia, China is set to release its latest manufacturing and non-manufacturing purchasing managers' index (PMI) surveys. Official PMIs are scheduled for Thursday, while Caixin figures will be out on Friday.

"January's manufacturing PMIs had diverged between the official and private number, though both remained within contraction territory. This is an expected likelihood with February's reading as well," said Ms Pan.

At the same time, the market may take the reading with a pinch of salt due to the Chinese New Year holiday earlier this month, she added.

Other Asian economies with data releases this week include South Korea with February trade data, and Japan, Indonesia and Thailand with February consumer price index (CPI) data, all on Friday. Fourth-quarter GDP data is expected from Hong Kong on Wednesday, followed by the same for India on Thursday.

Singapore will release January's CPI today, followed by industrial production figures tomorrow. Thursday will see the release of bank lending and producer price index numbers.

Markets that will close this week for holidays include the Philippines on Feb 25, Taiwan on Feb 28 and March 1, and South Korea on March 1.

 
A version of this article appeared in the print edition of The Straits Times on February 25, 2019, with the headline 'Extended US-China trade talks in spotlight'. Print Edition | Subscribe