Asian equities are generally lower in a new week, following last week's selloff in US. Sentiments are weighed down over slowdown in China's economy and investors are cautious ahead of FOMC meeting. It's generally expected that Fed will keep policies unchanged this week. Nonetheless, markets are expecting Fed to finally lift interest rate at the next meeting in September. And thus, there is some expectation that Fed might send some fresh hint about this in this week's statement. At the time of writing, Nikkei is down -200 pts, or -1% while HK HSI is down -600 pts, or -2.3%. Gold recovers mildly today but is feeling pressure from 1100 level, which limits the recovery. Crude oil is trading softly below 48. In the currency markets, Yen is generally higher on mild risk aversion while dollar is generally weaker. Euro, on the other hand, is broadly higher as last week's recovery continues, following New Zealand dollar.
In Japan, BoJ deputy governor Hiroshi Nakaso warned on the negative impact of China's slowdown and Fed's rate hike on the Japanese economy. Nakaso said that "even if China's economy maintained its growth rate, the main contribution would be from public investment, so the effect on Asian economies and Japan's exports warrants due attention." Nonetheless, he sounded optimistic that the price trend in Japan will continue to improve steadily. He expected inflation to hover around zero until summer and then pickup rather quickly after that. He expected CPI to climb back to 2% around first half of fiscal 2016. Released from Japan corporate service price rose 0.4% yoy in June versus expectation of 0.6% mom.
Looking ahead, German Ifo is the main focus in European session. The Ifo business climate is expected to drop slightly to 107.2, current assessment down to 112.9 and expectations down to 101.8. Germany will also release import price index. Eurozone will release M3. UK will release CBI trends total orders. From US, durable goods orders are expected to rise 3.5% in June while ex-transport orders are expected to rise 0.5%.
For the week ahead, FOMC will be main focus this week. Also, attentions are on Q2 GDP data from US and UK. Eurozone and Japan CPI to be released on Friday will also be watched. Here are some highlights for the week:
- Tuesday: UK GDP; Canada IPPI and RMPI; US consumer confidence
- Wednesday: Japan retail sales; German Gfk consumer sentiment; UK mortgage approvals; US pending home sales, FOMC
- Thursday: Australia building approvals; Swiss KOF; German unemployment; US GDP, jobless claims
- Friday: Australia PPI; Japan CPI; German retail sales; Eurozone CPI, unemployment; Canada GDP; US employment cost, Chicago PMI.