Originally published by AxiTrader
It's going to be a big week for global markets with meetings and decision by the Bank of Japan, Bank of England, and US Federal Reserve. Markets are really only expecting the Bank of England to really alter policy - or perhaps not.
But whatever the outcomes from these meetings, and in particular the statements that accompany them there is little chance they don't move markets across the Asian region and across the globe.
And central bank meetings are just the start of it with a raft of global data including US PCE data tonight, PMI's in Asia and across the globe, not to mention the release of September non-farm payrolls Friday night to cap the week off with a bang.
Literally a bang. The market is thinking given that forecasts are that the US economy created 300,000 non-farm jobs during the month of September in a massive snapback from August's hurricane impacted fall.
After such a strong week of gains for US stocks, a surge in the US dollar, and a break out in 10-year bonds markets across the Asian region are likely to be buffeted by the flow of data and events.
The region itself has plenty of data to absorb.
Already this morning showed that Japanese retail sales bounced back in September with a 0.8% increase taking the year on year growth rate to 2.2%. But that data undershot expectations of a lift to 2.5%.
Japanese Retail Sales YoY (Source: TradingEconomics.com)
Retail sales in Japan have taken a material lift higher over the course of 2016 after a poor 2016. Is that enough for the BoJ to change tack at today's meeting and lift its foot off the monetary accelerator?
Probably not given last week's data showed September year on year inflation static at just 0.7%.
Elsewhere in Asia the solid and continuing rally in US stocks should provide a good lead for the region's bourses.
Whether it's the Shanghai Composite, the Hang Seng, or the Nikkei 225 - among others - weaker currencies, global growth, investor risk appetite, and the rally in US stocks remain a solid tailwind for continued gains.
Toppy and frothy technically? Yes. But my weekly Jimmy R indicator I use for stocks is pointing higher on all these indexes. Here is the Hang Seng as an example.
Turning to currencies now and Friday night's reversal in the USD from its highs has materially clouded the outlook.
We've got a shooting star on the USD/SGD dailes with the price now back at 1.3653 after peaking at 1.3713 on Friday. We have the USD/KRW rates slipping lower at 1126 as it drifts below the recent uptrend, and we have the USD/CNY rate looking like it is rolling over at 6.6498.
It will all prove ephemeral if I right in my view that the US dollar has much further to run in this current rally. I've articulated my view in this piece earlier focussing on the euro as the bellwether of the US dollar move and highlighting both the data flow and positioning of longs which could precipitate further US dollar strength.
Perhaps the pace of the US dollar's move is a short term is a handbrake. But as this chart of the USD/SGD shows DollarAsia does look set to continue to move higher in the weeks ahead.
Moody’s was out Friday saying that President Xi’s iron grip on China may actually help economic reforms. “We believe this consolidation could increase the alignment of incentives between the central leadership and other officials, and thus could advance the process of economic reform and rebalancing,” Moody’s said in a report. Michael Taylor, Moody's chief credit officer for Asia Pacific, said “It remains unclear whether the increased centralization of authority will result in an acceleration of the pace of reform or a continuation of the gradual implementation of economic liberalization, which balances other policy objectives such as maintaining relatively strong growth and the strong role of state-owned enterprises observed in recent years”. For me the point is that Xi elevated the party, not the market, back to centre stage in China. So reform will continue, provinces will tow the line, and we’ll see more of what we’ve seen for the past few years. That is, slowing growth, more reform, and a focus on stability.
On Friday data from China showed industrial profits surged 27.7% in September. That was up from a 24% year on year pace the previous month.
Have a great day's trading.