Markets insights

Markets to focus on trade as 'phase one' deal approaches

The three major US stock indices retreated last Friday after hitting all-time highs on Thursday. The markets were dragged down by Boeing's deepening crisis over the 737 Max as revelations of the corporation's disregard for safety emerged.
The three major US stock indices retreated last Friday after hitting all-time highs on Thursday. The markets were dragged down by Boeing's deepening crisis over the 737 Max as revelations of the corporation's disregard for safety emerged.PHOTO: REUTERS

Successful signing will lift US, China economies, says expert; US will kick off busy earnings season this week

Financial markets will refocus on trade this week, as the long-awaited "phase one" trade deal between the United States and China is expected to be signed in Washington on Wednesday.

While details of the partial deal are scant, a successful signing will be a boost to both economies, said Mr Toby Wu, senior analyst at trading platform eToro.

It would also be a welcome bit of positive news amid other concerns that have been plaguing investors. At the end of last week, markets appeared to have largely moved past the US-Iran conflict, although Iran's admission over the weekend to having "unintentionally" shot down a Ukrainian passenger jet could cause tensions to flare up again. The country had previously denied any involvement in the crash.

Last Friday, US markets were dragged down by Boeing's deepening crisis over the 737 Max aircraft. Internal e-mail released by the corporation last Thursday revealed a disregard for safety and disrespect for the Federal Aviation Administration, as well as awareness among employees of the aircraft's potential failure.

The three major stock indices, which had hit all-time highs last Thursday, retreated following the news. The Dow Jones Industrial Average closed at 28,823.77, down 0.5 per cent; the S&P 500 retreated to 3,265.35 and the Nasdaq Composite Index ended at 9,178.86, both down 0.3 per cent.

While the US appears to be progressing on one trade front, investors should be wary of developments on another, said Mr Han Tan, market analyst at FXTM. In an outlook note last Friday, he flagged US President Donald Trump's pending decision to raise tariffs on European Union (EU) automotive goods, a move which the EU said would provoke retaliation.

"Should barriers to global trade be heightened once more, that may dim the chances of a global economic recovery in 2020," Mr Tan said.

The US will kick off a busy earnings season this week, with banks leading the way.

Data releases include last December's consumer price index tomorrow, advance retail sales on Thursday and industrial production numbers on Friday.

 
 
 

China is expected to report a rebound in December trade data tomorrow, with exports forecast to rise 1.9 per cent year on year, and imports to soar 9.5 per cent. Both measures were down 1.3 per cent last November.

This will be followed by its gross domestic product figures for the fourth quarter on Friday, with estimates coming in at 6 per cent GDP growth for the quarter to bring full-year growth to 6.1 per cent, down from 6.6 per cent in 2018.

Markets in Japan will be closed today for a holiday.

In Singapore, non-oil domestic export data for last December is due on Friday. UOB Global Economics and Markets Research forecasts a fall of 1.8 per cent year-on-year, an improvement on last November's 5.9 per cent decline.

A version of this article appeared in the print edition of The Straits Times on January 13, 2020, with the headline 'Markets to focus on trade as 'phase one' deal approaches'. Print Edition | Subscribe