Business

All ears for Trump and Fed speeches

Traders' expectations of market-moving news last week didn't quite unfold with the minutes from the Federal Reserve's Open Market Committee providing little insight.

Moreover, having recovered from barely reacting to last Monday's Budget 2017 presentation, the news-hungry local bourse could see a varied trading pattern this week.

On traders' crosshairs is the search for clues in US President Donald Trump's first address to a joint session of Congress tomorrow, be it on his tax reform promises or the US trade relationship with China.

"The relationship between the US and China is of vital importance for the world both from an economic and a geopolitical perspective," said Pictet Wealth Management senior Asia economist Dong Chen.

"Increasing evidence suggests that Mr Trump will likely follow through with at least some of the protectionist policies that he threatened to do during his election campaign, and that China will top his list of targets," he added.

A conflict between the two nations that could escalate into "damaging confrontation", be it a trade war or over the South China Sea dispute, could spell "grave concern" for markets and create volatility in financial markets, warned the economist.

Further lighting the torch for market direction is more data flow out of the world's largest economy, with updates on fourth quarter GDP and the appearance of several Federal Reserve speakers.

"We have been familiar with the fact that Mr Trump's appearances can be wild cards for markets but the second reading for the US economy's Q4 2016 performance is expected to show an upward revision," said IG Markets strategist Pan Jingyi.

"This could pivot some of the market's attention back to fundamentals and potentially help the USD index up into the end of February. Contributing to the attention on fundamental performances would be the series of Fed member appearances, including Fed chair Janet Yellen speaking on economic outlook at the end of the week," she added.

A string of macro data throughout the week could also set the tone for equity markets.

This includes euro area's inflation data, manufacturing showing in key Asian economies, the US, China and euro area, and trade data out of South Korea, Thailand, Malaysia and Australia, among others.

While China's encouraging manufacturing outing has helped buoy rising optimism in Asia, the upcoming purchasing managers' index, however, may provide little fresh inspiration for regional markets, said Ms Pan.

There is one other sign the market may start wanting to pay more attention to.

In a recent note, Maybank Global Research sounded the "caution alarm" against market complacency on political risks in Europe, more so with the fast-approaching election season in Holland in mid-March and France in late April to early May.

Said Maybank: "Opinion polls of late suggest far right parties are leading in the polls for both Holland and France.

"Though past history of UK's Brexit and the US election showed that polls have lost their predictive powers, they are the only source of information available and look set to swing sentiment in the lead-up to election day.

"Polls favouring far right parties could heighten the level of volatility and depress sentiment."

There is a lot of news to wrap its head around for the local bourse's key Straits Times Index which managed to inch up 0.3 per cent or 9.4 points last week.

Wall Street's winning streak last Friday could be an impetus for the local bourse to start the week's trading on an upbeat note.

The Dow extended its record-setting streak, hitting another high for the eleventh straight session for the first time since 1992.

This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts

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