Markets Insights

Eyes on Asia ahead of economic data releases

A worker polishing an oil pipe at a factory in China's Shandong province. China's export orders fell and manufacturing activity sank to a three-year low last month amid worries about the US trade war and an economic slowdown. Investors will be watchi
A worker polishing an oil pipe at a factory in China's Shandong province. China's export orders fell and manufacturing activity sank to a three-year low last month amid worries about the US trade war and an economic slowdown. Investors will be watching Asian markets for growth indicators this week as China and its regional neighbours prepare to release new economic data.PHOTO: AGENCE FRANCE-PRESSE

As indexes roll out across Asia this week, data from China will drive market sentiment

While February is the shortest month of the calendar year, it certainly served up some action for investors to ponder.

Last week's key events saw trade issues and geopolitical risks take the spotlight, with ForexTime research analyst Lukman Otunuga noting that "geopolitical risks have left global sentiment extremely fragile, while there is still a fair degree of uncertainty over trade developments".

Economic data was not a big driver of market sentiment. But this week, it is likely to take centre stage, with key data releases in China to provide leads.

On Wall Street last Friday, the Dow Jones Industrial Average and S&P 500 snapped three sessions of losses, buoyed by optimism on the prospects for a United States-China trade agreement.

The positive sentiment countered lacklustre US and China manufacturing data, though both sets of figures beat expectations.

Meanwhile, the tech-heavy Nasdaq recorded its longest streak of weekly gains since late 1999.

WARNING SIGNS

Following the (recent) slide for the official manufacturing PMI to a three-year low, exports are seen to falter into February. Perhaps another reminder to watch for China is economic weakness.

IG MARKET STRATEGIST PAN JINGYI, on indicators of a possible slump in China.

The Dow Jones rose 110.32 points, or 0.43 per cent, to 26,026.32.

Meanwhile, the S&P 500 gained 19.2 points, or 0.69 per cent, to 2,803.69, and the Nasdaq Composite added 62.82 points, or 0.83 per cent, to 7,595.35.

For the week, the S&P rose 0.4 per cent while the Dow fell 0.02 per cent and the Nasdaq rose 0.9 per cent.

The economic docket this week includes today's Singapore purchasing managers' index (PMI) survey for last month, tomorrow's Nikkei PMI, and Thursday's Singapore official foreign reserves data.

Investors will also be focused on the slew of February data releases in China. The Caixin services PMI survey is due out tomorrow and foreign reserves figures on Thursday.

Friday will see last month's trade, consumer price index and producer price index numbers.

On the Chinese economy, IG Singapore market strategist Pan Jingyi commented: "Following the (recent) slide for the official manufacturing PMI to a three-year low, exports are seen to falter into February. Perhaps another reminder to watch for China is economic weakness."

Other regional releases to look out for this week include Australia's gross domestic product figures for the fourth quarter of 2018 and the January trade data on Wednesday.

Malaysia is also due to release January trade data figures today.

Among central banks, the Reserve Bank of Australia and Bank Negara Malaysia have policy rate decisions to make on Tuesday. Both are expected to keep their rates unchanged at 1.5 per cent and 3.25 per cent respectively, United Overseas Bank's economists said.

In the US, investors and market watchers are likely to take interest in last month's labour market update, with payrolls expected to remain healthy and the unemployment rate likely to dip.

A US Commerce Department report on Friday showed that inflation pressures remain tame against the backdrop of slowing domestic and global economic growth.

These factors, said Bank of Singapore chief economist Richard Jerram, would reinforce the Federal Reserve's recent move to be "patient" before tightening policy any further.

IG's Ms Pan said that Fed chair Jerome Powell's upcoming speech on Friday, which will cover monetary policy normalisation, would be important to look out for prior to the March 19-20 Federal Open Market Committee meeting.

A version of this article appeared in the print edition of The Straits Times on March 04, 2019, with the headline 'Eyes on Asia ahead of economic data releases'. Print Edition | Subscribe