Markets Insights

US earnings, Chinese data in focus this week

Shoppers outside a mall in Xiamen, Fujian province. Key data to be released from China this week includes its September producer price index and consumer price index, both due to be out tomorrow. Retail sales, industrial production and third-quarter
Shoppers outside a mall in Xiamen, Fujian province. Key data to be released from China this week includes its September producer price index and consumer price index, both due to be out tomorrow. Retail sales, industrial production and third-quarter gross domestic product numbers are due out on Friday.PHOTO: REUTERS

Investors will be watching for impact of US-China trade tensions on company results

After stumbling on a severe sell-off led by the United States at the end of last week, markets will be watching the start of earnings season, the Federal Open Market Committee's (FOMC) September meeting minutes and a slew of Chinese data in the week ahead.

Most global markets regained their footing after one day of bloodshed, but the US equity markets took an extra day to recover.

Last Friday, the Dow Jones Industrial Average advanced 1.15 per cent to 25,339.99, while the S&P 500 picked up 1.42 per cent to reach 2,767.13. The Nasdaq Composite rose 2.29 per cent to 7,496.89.

However, gains were capped by continued worries over trade tensions and rising interest rates.

All three US indexes experienced their largest weekly percentage declines since March 23.

In a note last Friday, JPMorgan Chase & Co's Dr Marko Kolanovic said forced selling by computer-driven trading strategies likely aggravated the sell-off, and the worst of the rout should be past, now that such systematic selling has run its course.

But Ms Janna Sampson, co-chief investment officer at OakBrook Investments in Illinois, told Reuters that the recovery could remain vulnerable as long as the US-China trade dispute is unresolved.

  • 6.6%

  • China's estimated year-on-year third-quarter GDP growth, down from 6.7 per cent in the previous quarter.

"If earnings come out good, I think this rally is sustainable if we don't get negative trade news," she said.

US events in the week ahead include the FOMC's September meeting minutes to be released on Thursday and the quarterly reporting season kicking off in earnest.

Investors will be watching for the impact of the heightened US-China trade tensions on company results.

The US Treasury is also expected to release its semi-annual report on foreign exchange rate practices soon, with UOB Global Economics & Markets Research noting that the October report was typically released between Oct 14 and Oct 19 in the past five years.

"This report takes top spot following US Treasury Secretary Steven Mnuchin's comments that the US Treasury is monitoring currency issues very carefully and that he wants to discuss the currency issues with China as part of trade talks and make sure China is not engaging in competitive devaluation," UOB said.

European Union leaders will meet on Thursday and Friday to discuss migration and internal security issues, as well as the state of Brexit negotiations.

The Italian government's plans to increase borrowing over the next three years may also surface in talks.

Reuters reported that European participants found themselves fielding numerous questions on the issue in their conversations with other officials at the International Monetary Fund-World Bank meetings over the weekend.

Key data from China will include its September producer price index and consumer price index, both due out tomorrow.

The stream of Chinese data this week will also see the release of retail sales, industrial production and third-quarter gross domestic product (GDP) numbers on Friday.

Bloomberg consensus is 6.6 per cent year-on-year GDP growth in the third quarter, down from 6.7 per cent in the previous quarter.

In other Asian markets, the Reserve Bank of Australia will release its October meeting minutes tomorrow, while South Korea's central bank is expected to keep its policy rate unchanged at 1.5 per cent when it announces its latest decision on Thursday.

Indonesia and India will release their September trade data today, and Australia puts out its September employment report on Thursday.

A few markets will close for holidays this week - namely Thailand today, Hong Kong on Wednesday, and India on Thursday.

At home, look out for the September non-oil domestic exports growth numbers on Wednesday, which UOB said may slow to 3.8 per cent year on year, from 5 per cent in August.

A version of this article appeared in the print edition of The Straits Times on October 15, 2018, with the headline 'US earnings, Chinese data in focus this week'. Print Edition | Subscribe