Markets Insights

Slew of data set to drive volatility in Asian markets

The US earnings reporting season kicks into full gear this week, with results expected from more than 200 companies. Wall Street's focus will be on tech firms, carmakers and oil majors, among others. Analysts expect volatility to continue to persist
The US earnings reporting season kicks into full gear this week, with results expected from more than 200 companies. Wall Street's focus will be on tech firms, carmakers and oil majors, among others. Analysts expect volatility to continue to persist in New York trading this week and until the US midterm elections.PHOTO: AGENCE FRANCE-PRESSE

Among S'pore data are inflation figures for Sept, Q3 job numbers

Asian markets look set for another week of volatile trading as the US earnings reporting season kicks into full gear and the European Union and Italy continue to clash over the latter's Budget.

In Singapore, where commentators expect corporate earnings for the third quarter to be mixed on persistent volatility in foreign exchange movements and dipping world trade, much attention will also be placed on economic data releases this week.

In the Singapore docket are last month's inflation numbers tomorrow, and Friday's preliminary unemployment figures for the third quarter and industrial production data for last month. Also on Friday, the Urban Redevelopment Authority is releasing its full third-quarter set of real estate statistics, including private home prices.

Mr Lukman Otunuga, FXTM research analyst, said in a note on Singapore: "Inflation data will be the focus on Tuesday, which could offer clarity over whether weakness in the Singapore dollar has translated to rising inflationary pressures."

Month-on-month inflation is forecast at 0.3 per cent, while year on year, it is expected to grow by 0.7 per cent.

MORE CLARITY LIKELY

Inflation data will be the focus on Tuesday, which could offer clarity over whether weakness in the Singapore dollar has translated to rising inflationary pressures.

MR LUKMAN OTUNUGA, an FXTM research analyst, in a note on Singapore.

United Overseas Bank (UOB) wrote in its weekly outlook: "We expect headline CPI (consumer price index) inflation to edge higher to 0.8 per cent year on year in September and, more importantly, we think core inflation could surprise higher, at 2 per cent year on year, the highest since August 2014."

Mr Otunuga said: "Investors will keep a close eye on the industrial production figures and the unemployment rate during Q3 for insight into the health of the economy. While stronger-than-expected economic figures will be a welcome development for the Singapore dollar, an appreciating dollar presents a threat to upside gains."

Meanwhile, Maybank analysts have said the focus remains on the Chinese yuan in the near term. The yuan could come "under pressure in the week ahead as Sino-US trade concerns could also persist".

They added: "A softer yuan could reinforce downside pressure on the Singapore dollar from a soggy euro. This should keep the Singapore dollar from climbing higher too rapidly in the week ahead."

It is full steam ahead on Wall Street as a slew of earnings results from more than 200 companies, with a focus on tech firms, carmakers and oil majors, among others. Most major US banks have already reported earnings for the quarter.

However, analysts have said that volatility may continue to persist on Wall Street through the week's earnings reports and may continue until the US midterm elections.

In the EU, short-term worries hang over the wrangle between Italy's Budget with the EU, and the latter is already indicating that it would not give in too easily to the Italian government's proposal for higher deficits. Meanwhile, "the proposal to extend the UK's Brexit transition period 'beyond 2020' risks extending uncertainty, though this remains more a risk for the pound and UK markets", Standard Chartered analysts said.

Among key data releases in Asia are South Korea's third-quarter gross domestic product (GDP) numbers on Thursday.

UOB analysts are bullish, expecting South Korea's GDP to grow by 2.7 per cent year on year, more than a Bloomberg consensus which is for a weaker growth of 2.3 per cent.

China's September industrial profit figures are due on Saturday.

In South-east Asia, Malaysia's September CPI figures are due on Wednesday. Indonesia's central bank is the only one with a monetary policy decision this week.

The European Central Bank (ECB) is scheduled to a make a monetary policy decision on Thursday.

Even though commentators expect the ECB to keep policy unchanged this month, Maybank analysts have said that ECB president Mario Draghi may "add more commentary on the Italian government Budget and the importance of keeping to EU Budget rules".

A version of this article appeared in the print edition of The Straits Times on October 22, 2018, with the headline 'Slew of data set to drive volatility in Asian markets'. Print Edition | Subscribe