MarketsInsights

Eyes on Fed meeting, US-China trade talks

US Internal Revenue Service (IRS) employees protesting earlier this month against the US partial government shutdown. The 35-day shutdown, which ended last Friday, has taken its toll on several key US agencies, including the IRS and the Bureau of Eco
US Internal Revenue Service (IRS) employees protesting earlier this month against the US partial government shutdown. The 35-day shutdown, which ended last Friday, has taken its toll on several key US agencies, including the IRS and the Bureau of Economic Analysis. US markets rose on news of the deal last Friday, with all three major indexes advancing.PHOTO: REUTERS

Markets see Fed keeping policy unchanged and do not expect much from trade talks: Analysts

The second round of US-China trade talks and the year's first US Federal Reserve meeting are set to dominate the news cycle in the week ahead, after concerns over the US government shutdown eased over the weekend.

US President Donald Trump last Friday signed a Bill to end the partial government shutdown, at least temporarily. The three-week spending deal will pave the way for a bipartisan House-Senate conference committee to negotiate border security, although Mr Trump has said that if he is dissatisfied with the results, the shutdown will resume or he will declare a national emergency to bypass Congress for his funding.

The 35-day shutdown has taken its toll on several key US agencies including the Internal Revenue Service, which struggled to get furloughed workers back in the office last week ahead of the tax filing season starting today, and the Bureau of Economic Analysis, which is unlikely to meet the original Jan 30 release date for US fourth-quarter gross domestic product (GDP) figures for last year.

US markets rose on news of the deal last Friday, with all three major indexes advancing. The Dow Jones Industrial Average gained 0.75 per cent to 24,737.20 and the Nasdaq Composite picked up 1.29 per cent to 7,164.86, with both gaining for the fifth straight week. Meanwhile, the S&P 500 rose 0.85 per cent to 2,664.76 but posted its first weekly loss of the year.

This week, markets will be watching closely the US-China trade negotiations on Jan 30-31, but are unlikely to sink on lack of a deal this time around, said IG Markets analyst Pan Jingyi.

She noted that it is hard to expect much from the meeting as little progress has been made since the first round ended in positive but vague statements, and there is still some time to the hard deadline of March 1.

The Federal Open Market Committee meeting is scheduled for Jan 29-30, and will be followed by FOMC chair Jerome Powell's press conference.

"Markets are expecting the Fed to keep policy unchanged in the January FOMC, but attention is likely on FOMC chair Powell's press conference, where he may expound further on the merits of being patient and data dependent, especially in the face of a record US government shutdown and missing key economic data like this week's Q4 GDP release," said UOB's Global Economics and Markets Research team.

In the absence of key data to guide market decisions, US corporate earnings will continue to draw investors' attention, the team added.

Important data releases for Asian economies will include China's manufacturing purchasing managers' index figures on Thursday and Friday.

"We aren't anticipating any bounce in activity in January, though the front-loading for the Lunar New Year holiday... leaves scope for an upside surprise," said ING economist Prakash Sakpal.

Several countries will be releasing trade data this week, with New Zealand set to publish numbers for December tomorrow, Malaysia to follow with the same on Wednesday, and South Korea to kick off January trade data on Friday.

Australia will report its fourth-quarter consumer price index on Wednesday, while South Korea, Thailand and Indonesia will release inflation data for January on Friday.

At home, the data docket will be modest, with only the December lending numbers and the fourth-quarter unemployment rate on Thursday.

Australia's stock exchange is closed today for the Australia Day holiday, while Malaysia will take a break on Friday.

A version of this article appeared in the print edition of The Straits Times on January 28, 2019, with the headline 'Eyes on Fed meeting, US-China trade talks '. Print Edition | Subscribe