Key events to watch in the week ahead

[MongiIG]

The upcoming week could see less hawkish Fed comments as we head into the blackout period, but sentiments will remain highly sensitive to incoming economic data and key corporate earnings releases to drive market moves.

Source: Bloomberg

 

Indices Shares Inflation Federal Reserve Central bank United States

 

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 20 January 2023 

This week’s overview

This week has presented a more risk-off tone in markets, with the VIX reclaiming back above its key 20 level as a sign of mounting market stress. Continued downside surprise in US inflation and deeper contraction in growth data have thus far failed to sway Federal Reserve (Fed) members in feeding markets with pivot hopes, with various Fed comments still guiding for a more hawkish rate path (above 5%) as compared to current market pricing. Perhaps the pocket of optimism is that we will see less of such comments as we head into the official Fed blackout period at the end of this week, but that will still leave sentiments highly sensitive to incoming economic data and key corporate earnings releases to drive market moves.

Here are some of the key events to watch next week:

 

25 January 2023 (Wednesday): Inflation figures from New Zealand, Australia and Singapore

Closer to the Asia region, inflation figures from New Zealand, Australia and Singapore will be due next week to provide further clues on central banks’ policies ahead. Coming off an upside surprise in Australia’s November monthly inflation, along with still-elevated reading of 7.3%, another 25 basis-point (bp) from the Reserve Bank of Australia (RBA) in February remains the consensus with a 62% probability being priced. That will, however, potentially mark the last rate hike from the central bank, with confirmation to be sought from the upcoming central bank’s guidance. On another front, Singapore’s inflation rate will also be due for release, with the core aspect still providing little conviction that a peak is in place. Past two months’ readings have hovered around 5.1%, just barely a tick lower from its high at 5.3%, potentially pointing to some pricing persistence.

 

25 January 2023 (Wednesday): Bank of Canada’s interest rate decision

Heading into the Bank of Canada’s (BoC) interest rate decision, market expectations have been somewhat split between a no-change (40.3%) and a 25 bp hike (59.7%), leaving the upcoming decision a potential close-call. Just this week, there are promising signs of moderating inflationary pressures but this will be pitted against still-elevated readings and a stronger-than-expected labour market, which leaves prospects of further tightening move on the table. Current market pricing suggests that an upcoming 25 bp hike will be the last tightening move, bringing a subsequent rate pause in sight and any confirmation from the central bank will be perceived as a dovish take. For now, the USD/CAD remains supported by an upward trendline, with a bullish crossover on moving average convergence/divergence (MACD). Any move above the 1.350 level of resistance will be on watch to pave the way higher towards the 1.370 level next.

 

Source: IG charts

 

26 January 2023 (Thursday): Advance estimate for US Q4 GDP

Risk assets have been hammered this week, as significantly lower-than-expected economic data gave rise to mounting growth concerns, with the narrative seemingly shifted towards ‘bad news for the economy is bad news for the markets’. While the upcoming US quarter four (Q4) gross domestic product (GDP) data may be backward-looking, a more resilient number could be looked upon to provide more conviction of a potential ‘soft landing’ and room to avoid a recession ahead. Current expectations are for US Q4 GDP to come in at 2.8% quarter-on-quarter, down from the previous 3.2%.

 

27 January 2023 (Friday): US core Personal Consumption Expenditures price index

Being the Fed’s preferred inflation measure, the December number for US core Personal Consumption Expenditures (PCE) price index will be in focus to provide the last glimpse of pricing pressures before the next Federal Open Market Committee (FOMC) meeting (31 Jan – 1 Feb). Thus far, past few months of downside surprise in inflation have failed to sway Fed policymakers’ views of having a peak rate above 5%, with market participants looking for another lower-than-expected reading to support their less-hawkish pricing for Fed’s rate outlook. That said, market reaction to the moderating-inflation story has been more measured recently, seemingly with much already being priced after past two consecutive months of inflation downside surprise. It may now take a shift in tone from the Fed to drive a more sustained rally, which could still be unlikely to play out yet, with inflation more than two-fold above its target 2%.

 

23-27 January 2023: US big tech earnings release (Microsoft, Tesla)

Companies accounting for around 26% of S&P 500 market capitalisation will be releasing their earnings next week, which includes US indices’ heavyweights such as Microsoft and Tesla. Both companies are likely to see further earnings moderation from economic pressures, with Microsoft expected to face its weakest earnings growth since 2016 while latest vehicle delivery figures for Tesla suggests that it may fall short of its 50% growth target each year. With both valuation still trading at a premium above the broader market (S&P 500), failure to meet market expectations could call for further downward re-rating in share price. The Nasdaq 100 index has thus far failed to overcome a downward trendline resistance, which is key in pointing to a potential reversal in sentiments. On the downside, the 10,600 level will be on watch in marking multiple bottoms over the past quarter.

 

Source: IG charts

[MongiIG]

Week Ahead 23/1/23: US GDP; Tesla earnings

There is a fair bit of US data next week, most of which has the potential to move the markets. However, IG analyst, Axel Rudolph FSTA, picks out the S&P 500 in response to US GDP.

 Jeremy Naylor | Writer, London | Publication date: Friday 20 January 2023 

Earnings come in from many companies, particularly in the US where most of the large cap businesses are all sessions on the IG platform. Axel chooses Tesla, drilling down from the weekly chart.

(Partial video transcript)

23/01

Let's take a look now at the week ahead for the week starting monday the 23rd of January. We begin with the economic calendar on Monday where we start off with the consumer confidence flash data for the eurozone. Be interesting for a euro/dollar trade, as we look at the beginning of next week.

24/01

Let's take a look at what's happening on Tuesday. Overnight we get the NAB business confidence, the National Australia Bank issuing details of what's happening in Australia. We've recently seen an uptick in retail sales. This is going to show through in the business confidence area in Australia.

Meanwhile, german GfK consumer confidence comes out a little bit later on in the morning along with eurozone, UK, US and S&P global manufacturing services PMI flash data gives an insight into how the purchasing managers are feeling about the outlook for the various economies.

And the weekly American Petroleum Institute crude oil inventories.

25/01

Take a look at Wednesday the 25th, we get Australian fourth quarter trimmed mean CPI, a snapshot of inflation within the Australian economy.

And then the Ifo business climate from Germany later on. At 1:30 in the afternoon, the Bank of Canada comes through an interest rate decision and a full monetary policy report.

Then there's a weekly EIA crude oil inventories to round off Wednesday.

26/01

On Thursday we get some big data coming through, its a first look at fourth quarter growth numbers, we also get durable goods, wholesale inventories and jobless claims and new home sales in the States, so bonanza of data out at 13:30 on Thursday UK time.

27/01

And then Friday personal income and spending in the US along with the PCE price data, pending home sales, and the weekly Baker Hughes oil rig count.

 

 

[MongiIG]

Key events to watch in the week ahead: 30 Jan – 3 Feb 2023

It has been a risk-on week for markets, with the S&P 500 and Nasdaq reclaiming their respective 200-day moving averages (MA) for the first time since April 2022.

Source: Bloomberg

 

Indices Federal Reserve Interest rate United States Inflation Central bank

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 27 January 2023 

This week’s overview

It has been a risk-on week for markets, with the S&P 500 and Nasdaq reclaiming their respective 200-day moving averages (MA) for the first time since April 2022. Easing bearish bets are presented with further moderation in the CBOE put-call ratio after hitting extreme-bearish levels to start the year, while the VIX struggled to stay above its key 20 level for now. This comes despite further job cuts, pull-back in corporate spending and a weaker consumer spending outlook being the takeaways this week. It will be another busy week ahead, with a series of central bank interest rate decisions lined up on the calendar, along with more earnings releases from index heavyweights.

Here are some of the key events to watch next week:

1 February 2023 (Wednesday): US Fed interest rate decision

Current market expectations have largely priced for a 25 basis-point hike in the upcoming FOMC meeting, with another final 25 basis-point (bp) hike in March to bring the terminal rate to the 4.75%-5% range. This is less hawkish than what US policymakers have been guiding for, potentially bringing a scenario of some tug-of-war. Just last week, Fed officials were still throwing their support for a move above 5% and no rate cuts through 2023. Fresh economic projections and dot plot will only come in the March meeting, leaving market sentiments to be highly sensitive to the upcoming Fed statement and particularly to Fed Chair Jerome Powell’s tone at the press conference. With still above-target inflation readings, the Fed may refrain from feeding markets with any pivot hopes prematurely but any emphasis on a more data-dependent stance may potentially be looked upon positively. This is considering that recent economic data has been supportive of a less aggressive Fed, although policymakers have been unshaken thus far.

After declining close to 12% from its September 2022 peak, the US dollar has been largely in consolidation mode over the past week. Muted moves thus far suggest some wait-and-see for now, with the dollar resting on the 101.00 level of support. The overall downward bias could still be presented with the lower highs and lower lows in place. CFTC data suggests that speculators have effectively switched to net-short US dollar positioning against other G10 currencies since November 2022, having unwound previous build-up in net-long positions.

Source: IG Charts

2 February 2023 (Thursday): Bank of England (BoE) interest rate decision

Expectations are for the BoE to deliver its last 50 bp increase (67% probability) at the upcoming meeting to 4%, before downshifting to 25 bp over the subsequent two meetings. With previous projections from the central bank pointing to a sharp decline in inflation from mid-2023, along with the UK economy in recession throughout 2023, the next phase of speculation has been revolving around a potential 25 bp rate cut in November or December this year. The GBP/USD seems to be completing an inverse head-and-shoulder pattern lately, with the pair hovering just below its neckline resistance at the 1.245 level. Any potential break above the 1.245 level may be on watch in the upcoming week.

Source: IG Charts

2 February 2023 (Thursday): European Central Bank (ECB) interest rate decision

Similar to the BoE, a 50 bp increase is the consensus (86% probability) for the upcoming ECB meeting, which will bring the key rate to 2.5%. With the central bank’s previous projection pointing to some inflation persistence until 2025, the path for higher rates seems likely to continue for the whole of 1H 2023. Current expectations are laying out 50 bp hikes over the next two meetings, before downshifting to 25 bp increases until deposit rate reaches 3.5%. The tone from policymakers has seen a firm hawkish build over the past few months, which is likely to be maintained at the upcoming meeting.

This will leave the EUR/USD in focus, which has been guided nicely by a rising channel pattern since mid-November last year. The 1.094 level may be the next line of resistance to overcome, in order to pave the way towards the 1.120 level next. Overall move remains upward bias for now, with a bullish crossover of its 100-day and 200-day MA playing out recently.

Source: IG Charts

3 February 2023 (Friday): US non-farm payrolls for January

Further moderation in the US labour market is expected to be presented in the non-farm payroll report next week, with 175,000 job gains in January, down from 223,000 in December. This will mark the fourth consecutive quarter of decrease, with unemployment rate expected to see a pick-up to 3.6% (previous 3.5%) amid ongoing layoffs. Moderation in labour demand is consistent with what the Fed aims to achieve to drive a more sustainable wage growth. With the data release coming after the Fed meeting, much may also depend on the takeaway from US policymakers. If Fed officials stay firm on their hawkish tone, there is a possibility that an underperformance in job gains and a higher-than-expected unemployment rate could bring recession fears back into the spotlight once more.

1-3 February 2023: US big tech earnings release (Advanced Micro Devices, Meta Platforms, Alphabet, Apple, Amazon)

For the US earnings season so far, 25% of S&P 500 companies have released their results and 70% of them have outperformed earnings expectations. This is lower than past historical trend of around 80% but nevertheless, the still-elevated beat rate provides a less pessimistic take on current conditions, with beaten-down expectations providing a low watermark for outperformance. This week has seen mega cap tech counters taking leadership for markets’ bullish moves, and the onus will fall on several big tech names next week to keep up with the momentum. Notable earnings releases include Advanced Micro Devices, Meta Platforms, Alphabet, Apple and Amazon.

The Nasdaq 100 index has broken above a key downward trendline resistance this week, suggesting a shift in sentiments to the upside. The index may set its sight on the 12,200 level in the upcoming week and overcoming it may pave the way towards the 13,000 level next, where a Fibonacci confluence zone resides.

Source: IG Charts

[MongiIG]

Key events to watch in the week ahead: 6 Feb – 10 Feb 2023

The risk-on environment has found further validation this week, as the Fed’s recognition of progress in the ‘disinflationary process’ was viewed as the dovish takeaway from the latest FOMC meeting.

Source: Bloomberg

 

Forex Inflation Federal Reserve Federal Open Market Committee United States dollar Consumer price index

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 03 February 2023 

This week’s overview

The risk-on environment has found further validation this week, as the Federal Reserve (Fed)’s recognition of progress in the ‘disinflationary process’ was viewed as the dovish takeaway from the latest Federal Open Market Committee (FOMC) meeting. US big tech earnings provided the next stage of hurdles to overcome, but overall, the higher highs and higher lows in US equity markets since October 2022 seem to reflect the bulls retaking control. The upcoming week will see the US earnings season on a lower gear, while the economic calendar could also take a slight breather from the current busy week. Nevertheless, interest rate decision out of the Reserve Bank of Australia (RBA) and Reserve Bank of India (RBI) are lined up ahead, along with further comments from Fed Chair Jerome Powell.

Here are some of the key events to watch next week:

 

7 February 2023 (Tuesday): RBA interest rate decision

The wide consensus is for a 25 basis-point (bp) hike in the upcoming meeting (90% probability), effectively bringing the cash rate to 3.35%. Expectations are also suggesting that cash rate from the RBA may peak at the 3.60% level, with another 25 bp hike by April 2023. This came after the recent pull-ahead in Australia’s inflation challenged hopes of a rate pause, with its monthly Consumer Price Index (CPI) in November-December surging to 8.1%. Much focus will be on how the RBA will address the recent inflation surprise. To recall, past policymakers’ views on cooling inflation by the end of last year did not play out as they expected, which could leave future rate decision to be more data-dependent as compared to a committal stance.

The AUD/USD will be key to watch, with the pair hovering just 1.2% away from its seven-month high. Recent bearish crossover on moving average convergence/divergence (MACD) seems to raise the odds of a near-term retracement, but greater conviction for sellers may be a break below the 0.698 level, where dip-buying activities were presented this week.

 

Source: IG charts

8 February 2023, 1am SGT (Wednesday): Fed Chair Jerome Powell’s speech

At the latest FOMC meeting, Fed Chair Jerome Powell has attempted to maintain his hawkish stance but markets are finding hints of dovishness in his words. With that, all eyes will be on whether he will want to take the opportunity at the upcoming speech to potentially set things straight. Any no-surprise or sticking to the same script as the FOMC press conference could potentially see equities ride higher, in line with the recent broader trend, while the US dollar could continue to struggle.

For now, the US dollar index remains guided by a falling channel pattern, with a recent support at the 101.30 level giving way in the aftermath of the Fed meeting. The overall downward bias remain intact, with the lower highs and lower lows presented since its September 2022 peak. That may leave the next line of support on watch at the 99.00 level.

 

Source: IG charts

10 February 2023 (Friday): China’s inflation rate

Reopening efforts in China towards the end of last year have aided to revive consumer prices in December, with an uptick to 1.8% from previous 1.6%. Further strength in CPI could be expected in January as well, with recent outperformance in China’s Purchasing Managers' Index (PMI) readings providing strong testament for the economic recovery. The People's Bank of China’s (PBoC) decision on its reserve requirement ratio (RRR) will also be released during the week, but could largely be a non-event with an expected no-change. Recent reopening efforts could reduce the need for more supportive policy measures and prompt some wait-and-see.

The Hang Seng Index has retraced from a 50% Fibonacci retracement at the 22,870 level recently, following a bearish MACD divergence and reversion of Relative Strength Index (RSI) to more neutral levels. That places an upward trendline on close watch in the near term, with any downward break potentially putting the 20,000 psychological level back in sight.

 

Source: IG charts

10 February 2023 (Friday): University of Michigan US consumer sentiment index (prelim)

Current expectations for the upcoming UoM consumer sentiment index are pointing to a slight uptick to 65.0, from previous 64.9. Nevertheless, this will mark the third consecutive month of improvement in consumer sentiments. Consumers’ inflation expectations will be key to watch as well. Year-ahead inflation expectations have receded for the fourth straight month in January, falling to 3.9% from previous 4.4%. Further moderation in inflation expectations may be on watch to support mounting hopes of a ‘dovish pivot’ by the end of the year.

[MongiIG]

Key events to watch in the week ahead: 13-17 Feb 2023

Following the recent post-Fed meeting rally, this week is largely met with a struggle in risk assets to move higher, as the holding up of the US dollar thus far seems to be keeping risk sentiments in check.

Source: Bloomberg

 

Forex Indices United States Inflation United States dollar Consumer price index

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 10 February 2023 

This week’s overview

Following the recent post-Fed meeting rally, this week is largely met with a struggle in risk assets to move higher, as the holding up of the US dollar thus far seems to be keeping risk sentiments in check. Treasury yields have also found some renewed upside, leaving behind doubts on whether recent ‘dovish’ market expectations have been overblown. That said, the near-term upward bias in US equity indices remain intact, which may leave any formation of a new higher low on watch in the event of further retracement. Looking ahead, the upcoming week will provide further clues on Federal Reserve (Fed)’s monetary policies, with the key risk event being the release of US consumer price index (CPI). Closer to home, Singapore’s 2023 budget statement will be in focus.

Here are some of the key events to watch next week:

 

14 February 2023 (Tuesday): US CPI

Markets may have been accustomed to seeing downside surprises in US inflation figures over the past months, but the upcoming US CPI will be another key test for risk sentiments. While the core reading are expected to show further moderation in pricing pressures from a year ago (estimated 5.5% from previous 5.7%), the month-on-month impact could present more of a tricky situation. Month-on-month, US core CPI is expected to deliver a 0.4% increase, up from 0.3% in December. Likewise, headline inflation is also expected to come in at a 0.5% increase from the previous month, reversing from the 0.1% contraction in December. That may challenge recent ‘dovish’ expectations by reiterating a higher-for-longer rate stance and pushing back the timeline for a rate pause.

The US dollar will be in focus. Recent resilience has seen the US dollar consolidating at a channel resistance, seemingly in preparation for an upward breakout. Further move above the 103.20 level will be on watch to pave the way towards the 105.00 level next, which could translate to downside risks for equities in the near term.

 

Source: IG charts

14 February 2023 (Tuesday): Japan’s Q4 GDP growth rate (preliminary)

The preliminary Q4 gross domestic product (GDP) number from Japan may reveal an improvement in economic conditions, with annualised growth rate expected to come in at 2% compared to previous quarter’s 0.8% contraction. A follow-through recovery from previous reopening efforts may be supporting private consumption for services, but that will have to be pitted against weak exports from global economic uncertainty, with the upcoming figure to reveal more on the overall net impact. The Nikkei 225 index has been resilient over the past weeks, largely riding on renewed dovish bets on the Bank of Japan’s (BoJ) monetary policies. That said, upward momentum has been moderating with a bearish crossover on moving average convergence/divergence (MACD) upon a retest of a 50% retracement level. Any downside may leave the 26,900 level in focus, where the 38.2% Fibonacci retracement level resides.

 

Source: IG charts

14 February 2023 (Tuesday): Singapore’s 2023 budget statement

In Singapore, all eyes will be on the upcoming 2023 budget statement, which may reveal measures to help the country navigate through the current inflationary environment, along with challenges to its open economy from downside risks in global conditions. Economic resilience thus far suggests that the timeline for Goods & Services Tax (GST) hike in 2024 may remain, but more targeted fiscal measures could be delivered to retrenched workers and the lower-income groups to alleviate cost of living concerns. Singapore’s January non-oil domestic exports (NODX) figure will also be released in the same week (17 February 2023, Friday). Coming after three consecutive months of year-on-year contraction, a lower-for-longer growth picture may remain as uncertainty in global economic conditions lingers.

After a period of consolidation, the Straits Times Index has failed to sustain above its key 76.4% Fibonacci retracement. This may leave the 3,320 level on watch as a potential resistance-turned-support in the near term.

 

Source: IG charts

15 February 2023 (Wednesday): US retail sales

Current expectations are for US retail sales to revert back into positive growth at 0.9% month-on-month, overturning the past two consecutive months of contraction (-1% in November, -1.1% in December). There could be mixed views on any robust figure, with market bulls tapping on it to support ‘soft landing’ calls while the bears will argue for tighter policies in reaction to potential persistence in pricing pressures. Risk sentiments may have to take its cue from the US inflation print to be released a day before. Any failure for the inflation data to reassure market participants of moderating inflation risks could see the retail sales figure being looked upon as a reflection of overblown consumer demand. If that occurs, it could drive a more hawkish recalibration in market peak rate expectations, with further build-up to the 5.25-5.5% range from current 5.0-5.25%.

[MongiIG]

Key events to watch in the week ahead: 20-24 Feb 2023

The grappling of how high Fed’s rates have to go will continue to dominate the landscape next week, as the US core Personal Consumption Expenditures (PCE) price index looms.

Source: Bloomberg

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 17 February 2023 

This week’s overview

Hopes of disinflation are being challenged this week, as a series of upside surprises in US inflation data seem to suggest that more needs to be done to bring pricing pressures under control towards the 2% target. The US dollar finds comfort on the hawkish recalibration in rates from the markets, heading to its one-month high after a period of indecision. The grappling of how high Fed’s rates have to go will continue to dominate the landscape next week, as the US core Personal Consumption Expenditures (PCE) price index looms. Another hotter-than-expected print could potentially double down on rate hike fears. Aside, the US Federal Reserve (Fed) meeting minutes and Reserve Bank of New Zealand (RBNZ) interest rate decision are lined up mid-week, and closer to home, Singapore’s inflation rate for January is expected.

Here are some of the key events to watch next week:

 

22 February 2023 (Wednesday): US Fed meeting minutes

Market participants had a ‘dovish’ takeaway from the previous Fed meeting, tapping on Fed Chair Jerome Powell’s acknowledgement of the ‘disinflation process’. Whether markets are being too optimistic on the Fed’s rate outlook will depend on the Fed meeting minutes, which will provide greater clarity on policymakers’ views. Focus will likely be on any slightest discussions of an impending rate pause from the central bank. That said, views from the meeting may be backward-looking, failing to factor in the recent upside surprise in US inflation readings, which seem to put the ‘disinflation’ narrative from the Fed in disarray. Therefore, much still awaits whether the minutes will be able to prompt a sustained reaction in markets.

Thus far, the S&P 500 remains on an upward trend on higher highs and higher lows, but the 4,200 level will serve as a key resistance to overcome. Near-term support remains at the key psychological 4,000 level.

 

Source: IG charts

22 February 2023 (Wednesday): RBNZ interest rate decision

Heading into the upcoming RBNZ meeting, a 50 basis-point (bp) hike remains the strong consensus (89% probability), but market pricing is also for a downshift to 25 bp hike thereafter. Declining economic activities and inflation being not as bad as feared since the last meeting have suggested cash rate increases to be less aggressive than before, with some paring bets that rates will peak at 5.50% as guided by the central bank’s previous estimates. Any dovish confirmation from the central bank and subsequent softer data could lead the NZD lower. For the NZD/USD, it seemingly trades within a double-top formation since November last year, and any break below the 0.622 level could be on watch to pave the way towards the 0.593 level next.

 

Source: IG charts

23 February 2023 (Thursday): Singapore’s core inflation rate

In line with the global trend, Singapore’s inflation rate has moderated from its peak of 7.5% in September last year, but still hangs more than three-fold that of the preferred 2% level. December revealed a 6.5% year-on-year increase in headline pricing pressures, while the core aspects came in unchanged at 5.1%. As the next Monetary Authority of Singapore (MAS) meeting looms in April, further persistence in inflation could warrant more tightening moves from the central bank, leading to further strength in SGD against its regional peers. For the USD/SGD however, recent resilience in the US dollar has driven a retest of the 1.341 level as near-term resistance to overcome. Any break above the 1.341 level could be on watch to pave the way towards the 1.360 level next.

 

Source: IG charts

24 February 2023 (Friday): US core PCE price index

Higher-than-expected inflation readings out of the US this week have led markets to revisit their rate hike expectations, with market participants finding greater conviction that a Fed’s move to the 5.25%-5.5% range is warranted. This is a hawkish shift from the 4.75%-5.5% range being priced just three weeks back. With the PCE Price Index being the Fed’s preferred gauge of inflation, another round of upside surprise could further anchor down such higher-for-longer rate expectations, which could provide another boost to the US dollar while weighing on risk assets. Over the past week, the US dollar has been edging higher in light of an upmove in Treasury yields. The 105.00 level will be on watch next for a retest, where its previous two-month high stands.

 

Source: IG charts

[MongiIG]

Week Ahead starting 27/02/23: Global economic sentiment; ABF, Bayer, Ocado earnings

Economic sentiment indicators from the eurozone and China could provide trading opportunities. Plus, look out for earnings from ABF (ABF), Bayer (BAYGn) and Ocado (OCDO).

 Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Friday 24 February 2023 

Economic Calendar

We've got economic sentiment numbers from the euro zone, the United States, durable goods orders and pending home sales as well. Of course, all this is interesting after the Fed minutes showed inflation is still on the radar of Fed officials. And that, in turn, might mean that rates or less aggressive interest rates might not come soon as equity markets had hoped.

Japan & France

Turning to Japan, we've got retail sales numbers and industrial production. From France, look out for their consumer price index. Inflation is looking like it's sort of coming off its peak there, but it is still really sticky, still really red hot.

North America

We're watching out for the country's Q4 GDP growth rate. In the US, wholesale inventories, the S&P Case-Shiller Home data and API crude oil inventories.

Australia & China

We're eyeing Australia's fourth-quarter GDP growth rate. From China, we get the Caixin Manufacturing Index. Germany releases retail sales numbers and its consumer price index. Across the Atlantic, manufacturing data and the EIA crude oil inventories are released on the 1st of March. Moving onto the latter half of the week, we have consumer confidence numbers from Japan and the consumer price figures from the euro zone and also the unemployment rate there. This is followed very closely by initial jobless claims data from the United States, which comes on Thursday. And then on Friday, we have details from China again, in the form of its services PMI after those manufacturing numbers earlier on the week.

[MongiIG]

The week ahead

A recap of all the week's events just passed and key events in the week ahead.

 

Source: Bloomberg

 

Inflation Unemployment European Central Bank Federal Reserve Consumer price index Labour economics

 Tony Sycamore | Market Analyst, Australia | Publication date: Friday 10 March 2023 

With the excitement of this week's RBA Board Meeting and US labour market data out of the way, attention next week turns to the ECB interest rate meeting, key U.S inflation data, and the February labour force report to be released in Australia.

Should next week's US CPI be much hotter than the 0.4% expected, it may be the final confirmation the market is looking for that the FOMC will hike rates by 50bp in March, thereby re-accelerating its rate hiking cycle. In Australia, there will be keen interest to see further confirmation that the labour market is cooling after the RBA's record 350bp of rate hikes since May.

The week that was - highlights

1. The RBA raised rates by 25bp to 3.60%, its 10th consecutive rate rise. Notably, it softened its forward guidance, removing key works "increases" and "months" from a critical paragraph in its February statement
2. The RBA's dovish shift was reiterated in a speech by Governor Lowe on Wednesday, who opened the door for a pause in the RBA's rate hiking cycle "[A]t some point, it's going to be appropriate to sit still and assess the collective effects"
3. In testimony to Congress, Fed Chair Powell opened the door for a 50bp rate hike in March and a higher terminal Fed terminal rate
4. Powell acknowledged that recent economic data has been stronger than expected. And if the "totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes."
5. Crypto-friendly bank Silvergate announced it would enter voluntary liquidation and liquidate its $2 billion asset portfolio
6. The AUD/USD plunged to a four-month low at .6567, battered by the twin heavyweights of a dovish shift by the RBA meeting and a hawkish shift from Fed Chair Powell.

Key events for the week ahead:

Thursday, March 14th: US CPI for February

In January, the annual headline inflation rate in the US fell from 6.5% in December to 6.4%, notebly less than the market forecast of 6.2%. Core CPI eased to 5.6% from 5.7% in December but less than market forecasts for 5.5%.

• This month's headline inflation is expected to increase by 0.4%, taking the annual inflation rate to 6%. Core inflation is expected to rise by 0.4%, with the annual rate at 5.5%
• Within the details, the rise in inflation is expected to be driven by gains in used car prices (+0.5%), reflecting rising used-car auction prices
• Strong demand for air travel and elevated jet fuel prices will see airfares increase by 8%
• Providing some offset shelter, inflation is expected to continue to decelerate.

 

Source: US BLS

Thursday, March 16th: Australia Labour Force Data for February

In January, Employment declined by 12k, its second fall in succession, missing market forecasts for a 20k rise. The unemployment rate rose from 3.5% to 3.7%, despite the participation rate dropping to 66.5%, falling further from the 66.8% high of November.

• The ABS noted, "Along with a larger-than-usual increase in unemployed people in January, there was also a similarly larger-than-usual rise in the number of unemployed people who had a job to go to in the future."
• While they would count as unemployed in the survey, this is largely temporary and like to do with some seasonal effects in play over the holiday period. It suggests that the labour market was not as weak as the headline implied
• This month the market is looking for a rise in employment of 45k and for the unemployment rate to remain at 3.7%.

 

 

Source: ABS

Thursday, March 16th: ECB interest rate meeting

• The ECB steps up the plate this week, and after raising its key deposit rate by 50bp in February to 2.5%, the market is fully priced for a follow-up 50bp rate hike this week
• Sticker-than-expected inflation will likely see the ECB signal another 50bp rate hike in May, with the market pricing a terminal ECB rate of 4% before year-end
• The faster pick-up in German growth numbers will likely see the ECB staff forecasts for both growth and core inflation revised higher.

 

 

Source: ECB

[MongiIG]

Key events to watch in the week ahead: 13-17 Mar 2023

As the countdown to the next Federal Open Market Committee (FOMC) meeting begins, the fate of the next rate hike from the Fed will likely hinge on several crucial labour and inflation data.

Source: Bloomberg

 

Forex Inflation Federal Open Market Committee United States Retail Consumer price index

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 10 March 2023 

This week’s overview

A hawkish takeaway from Federal Reserve (Fed) Chair Jerome Powell’s testimony has triggered a series of risk-off moves this week, which is further exacerbated by jitters in the US banking space. As the countdown to the next Federal Open Market Committee (FOMC) meeting begins, the fate of the next rate hike from the Fed will likely hinge on upcoming labour and inflation data. After the US job report release this week, next week will have all eyes on US February inflation rate and retail sales. Elsewhere, a series of economic data will also be released out of China to provide a better gauge of its recovery progress, along with key interest rate decision out from the European Central Bank (ECB).

Here are some of the key events to watch next week:

14 March 2023 (Tuesday): US February inflation rate

With the ongoing debate on whether we will see a 25 basis-point (bp) or 50 basis-point hike in the March FOMC meeting, the upcoming US Consumer Price Index (CPI) release will be one of the last few key data to drive policymakers’ views. Having witnessed an upside surprise in the previous reading, another round of above-expectation read will pressure the Fed to revert to larger hikes, which could come as further trade-off for equities’ gains. Current expectations are for both headline and core CPI to come in at 0.4% month-on-month, which will indicate some moderation in headline pricing pressures.

The US dollar will be on watch, still trading on its higher high, higher low narrative as an indication of a near-term upward trend. That said, its key 200-day moving average (MA) just lies up ahead, with more persistent pricing pressures needed to drive another round of hawkish recalibration in market expectations.

Source: IG charts

15 March 2023 (Wednesday): US February retail sales

US retail sales have roared back to life in January, with the 3% year-on-year growth smashing expectations. That said, stronger-than-expected consumer spending does not bode well for the current environment, where worries are for the Fed to do more to tame inflation. Another blowout figure at the upcoming retail sales data could add to recent jitters for a higher peak rate from the Fed, by suggesting that demand has not been moderating in line with the central bank’s aim. A higher-than-expected figure may be supportive of higher bond yields and stronger US dollar, which could be a challenge for the risk environment.

15 March 2023 (Wednesday): China’s January-February fixed asset investment, industrial production, retail sales data

Optimism surrounding China’s reopening has been dampened recently, with a disappointing gross domestic product (GDP) growth guidance at the Two Sessions, while inflation and trade data have also pointed towards a more modest domestic recovery. Nevertheless, expectations are for China’s retail sales to reflect a move back into positive growth after three consecutive months of contraction, while industrial production may also see some recovery to 2.6% (from the previous 1.3%).

For the Hang Seng Index, recent risk-off environment has led to the formation of a new lower low, suggesting that the bears remain in control for now. Further downside will place the 18,500-18,700 range on watch next, where a Fibonacci confluence zone resides.

Source: IG charts

16 March 2023 (Thursday): ECB interest rate decision

The ECB has stepped up its hawkish rhetoric in recent months on sticker-than-expected inflation, with a 50 basis-point hike fully priced by markets into the upcoming meeting. The focus will be what comes after the March meeting, with expectations still split on whether we can see a downshift in rate hikes thereafter. The macro projections at next week’s meeting will provide some clues, with any upward revisions in inflation forecasts or more resilient growth outlook likely to be looked upon with a hawkish view.

The EUR/USD has held up relatively well compared to other risk-sensitive pairs such as the AUD/USD. After being forced into a near-term ranging pattern, any break below the 1.052 level could reflect bears retaining control. Greater conviction for further upside could come with a break above the 1.068 level.

Source: IG charts

[MongiIG]

Key events to watch in the week ahead: 20-24 Mar 2023

 

Source: Bloomberg

 

Forex Inflation United States dollar Central bank Interest rate Singapore dollar

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 17 March 2023 

This week’s overview

This week has been a roller-coaster ride for global markets, with a series of banking fallouts triggering a wave of panic before somewhat settling down towards the end of the week. For now, the risk environment treads in a cautiously optimistic state, attempting to take on some relief from the extreme bearish sentiments. With the instabilities pushing rate expectations to the ‘dovish’ end, the upcoming week will leave any validation in the hands of a few central banks, particularly the US Federal Reserve (Fed). Policy rate decisions out of the Bank of England (BoE) and Swiss National Bank (SNB) will also be on watch.

Here are some key events to watch next week:

23 March 2023 (Thursday, 2am SGT): US Fed interest rate decision

Recent global financial instabilities have driven expectations that the Fed may be forced to put some focus on short-term economic stability in its policy outlook, which complicates the fight against still-elevated inflation. A 25 basis-point (bp) hike from the Fed next week is the broad consensus (80% probability), while Fed Funds futures pricing suggests that we could see an end to the rate hiking cycle by June this year. This is a stark contrast from previous policymakers’ guidance, with the upcoming dot plot to reveal whether such market pricing is being one-sided.

Any deviation away from a 25 basis-point move could potentially reignite market jitters. A 50 basis-point hike may trigger concerns of further side-effects from aggressive policy tightening, while a rate pause could suggest that the banking fallout may be more severe than expected to force some dovishness from the central bank. Economic projections will also be on watch to provide clues on policy outlook, with a focus on whether inflation projections will see a downward revision.

 

The US dollar has been a beneficiary of safe-haven flows, but a less hawkish recalibration in rate expectations is also keeping bullish sentiments in check. Near term, the 103.12 level will remain a key support to hold, failing which could pave the way to retest the 101.30 level next. Greater conviction for the dollar bulls may have to come from a move back above the key 105.00 level.

Source: IG charts

23 March 2023 (Thursday, 1pm SGT): Singapore’s February inflation rate

Following the renewed surge in inflation in January, pricing pressures are expected to show further persistence with a move to 5.7% from the previous 5.5%. This may seek to overturn hopes of a peak in inflation and raise the odds of further tightening from the Monetary Authority of Singapore (MAS) in April. Considering that the month of January could bring some one-off effects from the Chinese New Year period and the 1% GST rise, the upcoming figure should provide a clearer picture of the inflation trend. Previous projections from the MAS suggests that core inflation may remain elevated for the first half of this year, with any persistence in Singapore’s inflation to translate to SGD strength on speculation of tighter monetary policies.

The USD/SGD has been hovering above key support at the 1.341 level lately, with the turn in moving average convergence/divergence (MACD) suggesting some moderating upward momentum. Greater conviction for the bears may come from a break below the 1.337 level, where a Fibonacci confluence zone resides, which could pave the way towards the 1.318 level next.

Source: IG charts

23 March 2023 (Thursday, 8pm SGT): BoE interest rate decision

The previous BoE meeting in February saw a 50 basis-point move but attention is on the softer tone for its forward guidance, which suggested that the central bank’s hiking cycle could be nearing its end. Dovish rate expectations were further reinforced in the aftermath of recent global banking worries, with interest rate futures pricing a 40% probability that we will have a rate pause from the BoE next week. This is a stark shift from the 25% at the start of the week and 10% last month. Further evidence of disinflation will be sought from UK’s February inflation rate, which will be released a day before the meeting, but nevertheless, another one or two more 25 basis-point moves should mark the end of the tightening cycle.

The GBP/USD has managed to defend its double-top formation thus far, bouncing off the 1.180 level last week, where its 200-day moving average (MA) stands. An upturn in the MACD revealed building upward momentum and staying above its 200-day MA line could keep buyers in control. This may leave the 1.243 level on watch next, where the double-top peaks are in place.

Source: IG charts

23 March 2023 (Thursday, 4.30pm SGT): SNB policy rate decision

The SNB has been put in a difficult position lately, with Swiss’ higher-than-expected inflation keeping the pressure on for tighter policies but has to tread carefully with the global attention on Credit Suisse’s woes. Having hiked three times in 2022 to raise its policy rate out of negative territory to 1%, inflation remains above the targeted rate at 3.4% in February. Speculations have taken on a less hawkish shift this week, with market pricing for a 25 basis-point hike instead of the 75 basis-point move originally priced at the start of the month. Sticking to smaller hikes could be the preferred approach while waiting for the dust to fully settle.

[MongiIG]

Key events to watch in the week ahead: 27-31 Mar 2023

With the Fed meeting behind us, what are some of the key events to watch next week?

Source: Bloomberg

 

Forex Inflation Federal Reserve Central bank Reserve Bank of Australia Personal consumption expenditures price index

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 24 March 2023 

This week’s overview

This week brought a mixed tone out of the Federal Reserve (Fed) meeting, which signalled that its rate hike cycle is nearing an end, but with no room for rate cuts until 2024. Nevertheless, that provides the go-ahead for growth sectors to further take leadership from value – a trend that has been in place since the start of this year. This comes as dwindling authorities’ support for a 'blanket insurance' of bank deposits continue to put the financial sector on the backfoot.

With the Fed meeting behind us, here are some of the key events to watch next:

29 March 2023 (Wednesday, 8.30am SGT): Australia’s February monthly inflation rate

The recent Reserve Bank of Australia (RBA) minutes saw a step-down from previous hawkishness, as policymakers reconsidered the case for a rate pause at the following meeting. This has been supported by promising signs of easing inflation in January (7.4% versus previous 8.4%), with the absence of any upside surprise in pricing pressures in the lookout next week to further justify a rate pause from the central bank.

The dovish takeaway from the RBA has not been positive news for the Australian dollar, with an ongoing struggle for the AUD/USD to move back above its 200-day MA. A lower-than-expected inflation read next week will likely weigh on the pair further. Greater conviction for the bulls may have to come from a move back above the 0.680 level to overturn the lower-high narrative. Otherwise, trading below its 200-day MA may still keep the downward bias in place.

 

Source: IG Charts

31 March 2023 (Friday, 9.30am SGT): China’s March NBS manufacturing and non-manufacturing PMI

Reopening efforts in China have translated to a sturdy rebound in Purchasing Managers' Index (PMI) figures in January, with the manufacturing sector delivering its highest reading since 2012. The strength is mirrored in services activities as well, with its highest reading (56.3) in two years. All eyes will remain on how far the post-Covid recovery boom can continue, with the services sector having to step up to do the heavy-lifting, considering that external demand conditions may face further headwinds.

The China A50 index has been trading within a descending channel pattern since February this year, with recent price action nearing the upper channel trendline resistance. A stronger-than-expected recovery in China’s PMI next week may be supportive of upside, but a break above the channel pattern may be needed to provide greater conviction for the bulls.

Source: IG Charts

31 March 2023 (Friday, 5pm SGT): Eurozone’s March flash inflation rate

After the Fed signalled for a near-end to its rate hike cycle, expectations are mounting that the European Central Bank (ECB) could follow the Fed’s path of heading towards a potential rate pause despite core inflation showing no signs of peaking as of February. For now, rate expectations are still relatively split between the need to have one or two more 25 basis-point hikes over the next few meetings, and the inflation data will be on watch to anchor down some expectations.

More persistent inflation presented next week could likely lift the EUR/USD higher, keeping the pressure for the central bank to continue its rate hike process. The pair is currently near its February high, after a breakout from its ranging pattern. Any move above the 1.100 level of resistance could form a new higher high and reiterate the overall upward trend.

Source: IG Charts

31 March 2023 (Friday, 8.30pm SGT): US March core PCE price index

An impending rate pause seems to be the takeaway from the recent Fed meeting, with interest rate futures pricing for a 60% probability that we may have already seen its peak. However, that surely comes on the basis that inflation will continue to moderate moving forward. The resurgence in core PCE pricing pressures in February (4.7% from previous 4.6%) has been a challenge to dovish hopes, so another pull-ahead in inflation next week will likely keep the pressure on for the Fed to deliver another 25 basis-point at the next meeting.

The US dollar has breached its 103.12 level this week, with the formation of a new lower low keeping the downward bias in place. A higher-than-expected inflation reading next week may trigger a knee-jerk upside reaction in the US dollar, but with the banking crisis potentially driving some deflationary effect over the coming months, it could still be unlikely that the US dollar can see a renewed bull trend ahead.

Source: IG Charts

[MongiIG]

Key events to watch in the week ahead: 17-21 April 2023

While the US earnings season kicks in, what are some of the key events to watch next week?

Source: Bloomberg

 

Forex Commodities Export China Singapore United States

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 14 April 2023 

This week’s overview

Expectations for a potential rate pause after the Federal Reserve’s (Fed) May meeting have been validated this week, which forces the US dollar back towards its 2023 low, while lifting gold prices to its highest level since March 2022. Recession concerns continue to linger on investors’ minds, but for now, the prospects of an impending end to the Fed’s hiking cycle are sufficient to spur a risk-on environment, with the VIX trading firmly below its key 20 level this week.

Attention will be shifted towards the US earnings season next. The corporate earnings outlook may be far from rosy, but downbeat expectations could still provide a low hurdle for outperformance. Other than that, a series of economic data out of China will be in focus for the upcoming week as well, along Singapore’s March exports number.

Here are some of the key events to watch next week:

17 April 2023 (Monday, 8.30am SGT): Singapore’s March non-oil exports

The worst may not be seen for Singapore’s export sector yet, as intensifying risks to global growth continue to put pressure on external demand. February’s export reading has marked the fourth consecutive month, where exports have seen a double-digit decline. This is in line with other weak export numbers across the region as global demand falters. The trend is expected to remain, with Reuters poll looking at a 20.8% year-on-year decline in Singapore’s March exports next week.

A weaker-than-expected reading could likely weigh on the SGD further, reinforcing recent guidance from Singapore’s central bank that ‘the domestic economic slowdown could be deeper than anticipated’. However, it may have to take much more to overturn the downtrend in the USD/SGD, which is struggling to move back above a Fibonacci resistance at the 1.324 level. The formation of a new lower low reiterates its ongoing bearish bias for now.

 

Source: IG charts

 

18 April 2023 (Tuesday, 10am SGT): China’s economic data (Q1 GDP, industrial production, retail sales, fixed asset investment)

Subdued pricing growth and below-forecast factory growth activities have left some doubts on the strength of China’s economic recovery despite reopening, with the upcoming data to provide fresh update on its progress. First-quarter gross domestic product (GDP) is expected to grow at 4% year-on-year and 2.2% quarter-on-quarter, which may mark a positive step towards its growth target of around 5% for 2023. That said, some may argue that a 5% target following a low base in 2022 is underwhelming and are still expecting to see some outperformance. Retail sales will be on watch to do some heavy-lifting for growth, but industrial production may be more tepid for being dependent on external demand.

Signs of a stronger recovery may be supportive of Chinese equities, as we have seen with the positive reaction to better-than-expected trade figures this week. For the Hang Seng Index, the 20,900 level will be a key resistance to overcome, where a Fibonacci confluence zone stands. Any successful move above the level may pave the way to retest its 2023 high at the 22,900 level next.

 

Source: IG charts

 

17 – 21 April 2023: US earnings season

The US earnings season will shift into higher gear next week, with focus on results from US major banks (BAC, GS, MS), followed by Netflix and Tesla, which will set the stage for tech earnings. Based on FactSet, S&P 500 earnings are expected to decline by 6.8% from the previous year, which will mark the largest earnings decline by the index since quarter two (Q2) 2020. While market expectations remain relatively downbeat, one may argue that it provides a low hurdle for outperformance as well, which could provide legs for the recent rally with any positive surprises.

 

Source:Refinitiv

 

17 April 2023 (Monday): China’s one-year Medium-Term Lending Facility (MLF) policy rate
20 April 2023 (Thursday): China’s one-year and five-year loan prime rate

The upcoming week may also bring about a series of policy decisions from China, where subdued pricing pressures provide the room for further easing to lift growth if required. However, given that reopening efforts are largely at play, a rate cut from the People's Bank of China (PBoC) may instead trigger worries that the recovery is not as optimistic as initially expected. Consensus may be for a no-change once more. Lowering its growth target to only about 5% in 2023 may suggest that the authorities are willing to tolerate a lower-growth environment, which may reduce the odds of further monetary easing.

[MongiIG]

Key events to watch in the week ahead: 8-12 May 2023

With the Fed meeting behind us, what are some of the key events to watch next week?

Source: Bloomberg

 

Forex Inflation Federal Reserve Consumer price index Central bank Bank

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 05 May 2023 

This week’s overview

This week has been a turbulent one, with the conclusion of the Federal Reserve (Fed) meeting overshadowed by renewed banking jitters, while Apple’s resilient Q2 results provide some silver lining to end the week.

More than 80% of S&P 500 companies have released their results at the time of writing, which means that the earnings season will see some winding down ahead, bringing economic data back into the limelight to feed market moves. The upcoming weekend will also provide the opportunity for authorities to iron out any response to the renewed banking jitters. Any action (or inaction) on that front could dictate market moves to start the new week.

Aside, here are a few key events to watch in the coming week.

10 May 2023 (Wednesday): US consumer price index (CPI)

With expectations firming for an impending rate pause following the recent Federal Open Market Committee (FOMC) meeting, all eyes will be on the US CPI number next week to provide the justification that further hikes are not needed. More importantly, it will also determine if the central bank has room for rate cuts this year amid the downside risks for economic conditions.

Current market pricing is pointing to 75 basis-point (bp) worth of rate cuts by the end of this year and a higher-than-expected inflation read will likely translate to some pushback against those expectations.

Forecasts from the Cleveland Fed suggest that both headline (est 4.5%, previous 5%) and core pricing pressures (est 5.4%, previous 5.6%) may show further signs of moderation. The tendency for the Fed inflation forecasts to overstate the actual CPI over the past months may place the odds for some downside surprise.

11 May 2023 (Thursday): China’s inflation rate

Unexpected declines in China’s manufacturing Purchasing Managers' Index (PMI) lately have reflected an uneven recovery from reopening efforts and with March consumer inflation hitting its 18-month low, any subsequent uptick in prices will be on watch as a gauge for an improving demand outlook.

Nevertheless, subdued growth in prices will likely translate to more room for monetary policy easing from Chinese authorities to support growth. The economic surprise index for China is also hovering at its highest level since 2006, which suggests room for positive surprises ahead despite some hiccups in the manufacturing sector lately.

11 May 2023 (Thursday): Bank of England’s (BoE) interest rate decision

The BoE is expected to deliver its 12th straight interest rate hike at the upcoming meeting, with recent year-on-year inflation still in the double-digit (10.1% in March 2023) prompting that more needs to be done. Persistent price momentum has led market expectations to price for at least two more 25 basis-point hikes over subsequent meetings and rate cuts only in 2024, which could be deemed more hawkish compared to consensus from economists.

The economic surprise index for the UK is at its highest level since 2021, allowing some conviction for the central bank to move ahead with further rate increases. With a quarter-point increase largely priced for the upcoming meeting, forward guidance from the central bank will be the key focus. A softer tone towards wanting to see more data or a close call among policymakers to deliver a hike could be looked upon with dovish eyes and drive GBP lower.

Source: Refinitiv

12 May 2023 (Friday): US University of Michigan (UoM) consumer sentiment index (preliminary)

With consumer spending accounting for two-thirds of the US economy, the consumer sentiment index will be looked upon as a gauge of economic resilience ahead, fuelling the debate of a hard landing in the US or not. Since 1998, bottoming out in terms of the index seems to coincide with major lows in the S&P 500, so the absence of a sharp downturn in the reading could still be looked upon with some relief for the bulls.

Current expectations are for the upcoming reading to come in at 63.0, largely unchanged from the 63.5 in April. Barring any huge surprise on either end, market reaction has shown to be relatively short-lived from previous releases, leaving other catalysts as the greater driver for market moves.

[MongiIG]

Key events to watch in the week ahead: 15-19 May 2023

What are some of the key events to watch next week?

Source: Bloomberg

 

Indices Recession Retail United States Central bank Bank of Japan

 Yeap Jun Rong | Market Strategist, Singapore | Publication date: Friday 12 May 2023 

This week’s overview

The release of the US Consumer Price Index (CPI) figures has failed to drive much follow-through in the S&P 500's rally from last week, but the ongoing growth-value divide is evidently presented in the pull-ahead of the Nasdaq 100 index as opposed to the DJIA.

Unresolved banking jitters and gridlock over the US debt ceiling talks remain as key market overhang, but the VIX at its one-week low seems to reflect some calm – potentially with some expectations that these would be addressed ahead. As the US earnings season takes a backseat, here are a few key events to watch in the coming week.

16 May 2023 (Tuesday, 9.30am): Reserve Bank of Australia (RBA) meeting minutes

A surprise hike by the RBA in May has pushed back against broad expectations for a pause, so the upcoming minutes will provide some clues as to what may prompt the case for further hikes and where the peak rate may be. For now, it clearly seems that the pace of moderation in inflation remains too slow for comfort, despite having eased from its peak.

While policymakers’ guidance was that "some further tightening may be required”, current rate expectations are still having reservations of further hikes, leaning towards a prolonged rate pause through the rest of the year. Therefore, all eyes will be on whether such expectations will be swayed by the upcoming minutes.

16 May 2023 (Tuesday, 10.00am SGT): China’s fixed asset investment, industrial production, retail sales

Reopening optimism around China has seen some fizzling out recently, challenged by downside surprises in economic data, which is causing the China’s economic surprise index to moderate sharply from its multi-year high since the start of the month.

Focus will be on the upcoming series of data to provide any potential lift in confidence. A low base effect from April last year may beautify the upcoming year-on-year (YoY) numbers significantly, with broad expectations for retail sales to come in at 20.1% from previous 10.6%, while industrial production may come in at 10.1% (from previous 3.9%). But with the low-base effect being a known fact, the extent of any upside (or downside) surprises may be what markets are watching for.

 

Source: Refinitiv

 

16 May 2023 (Tuesday, 8.30pm SGT): US retail sales

US indices had managed to hold up previously with weaker-than-expected read in the retail sales figure, but with market views seemingly switching to ‘bad news (on the economy) is bad news (for markets)’ recently, any resilience in consumer spending could be on the radar this time round to support the indices.

This comes at a time where expectations are already well-anchored for an upcoming rate pause from the Federal Reserve (Fed) and economic resilience may be looked upon to push back against recession risks. Based on New York Fed’s estimate, the probability of a US recession over the next twelve months as predicted by 10-year/3-month Treasury spread is at 68%.

For now, consensus is leaning to a 0.7% month-on-month increase in US retail sales, reversing to positive growth from its past two months of contraction (-0.7% in February, -0.6% in March).

 

Source: Refinitiv

 

17 May 2023 (Wednesday, 7.50am SGT): Japan’s Q1 GDP growth (preliminary)

Current forecast for Japan’s quarter one (Q1) GDP is for a 0.7% increase, up from 0.1% in 4Q 2022 as delayed reopening efforts provide a lift for services sector spending and aid to cushion for weaker external demand. A lower-than-expected read could push back against reopening optimism, at a time where further downside risks to growth are presented over the coming months.

With the Bank of Japan (BoJ) still firmly on its accommodative tone, rate expectations could likely remain well-anchored, pricing for no rate hikes at least over the next three meetings from the central bank. That could leave the USD/JPY more sensitive to moves in the US dollar. The Nikkei 225 index may be in focus, with any surprise resilience in Japan’s economic conditions potentially translating to further traction.

17 May 2023 (Wednesday, 8.30am SGT): Singapore’s non-oil exports (NODX)

With Singapore’s economy being highly dependent on the trade sector, the upcoming Non-oil Domestic Exports (NODX) number will provide a fresh update on how the risks to external demand will play out. Previous months have marked its sixth consecutive month of contraction, but perhaps the silver lining is that contraction has been of a lesser scale since February this year.

Further recovery could be looked upon as a sign of economic resilience but with the Monetary Authority of Singapore (MAS) flagging the risk of a “deeper than anticipated” slowdown just last month, it seems the downside risks to global growth will remain for the foreseeable future.

 

Source: Refinitiv