Central bank meetings to drive markets
This week, the start of November trading will find the Singapore bourse immersed in a busy earnings season while scouring for possible leads from multiple central bank meetings including in the US, Japan and the UK, as well as from a string of macro data releases.
There could be positive spillover at the beginning of the week's trading from last Friday's data release that the United States grew at a brisk clip in the third quarter, defying the disruption from the hurricanes in Texas and Florida.
The Commerce Department last Friday said gross domestic product rose by 3 per cent in the July-September period, beating a 2.5 per cent projection by economists polled by Reuters.
Pundits expect the data will likely keep the Federal Reserve on track to continue raising its benchmark interest rate.
"This pace of GDP growth would bring forth an FOMC increase in the Fed funds rate in December and again one move in the first half of next year," said Wells Fargo in a note, referring to the Federal Open Market Committee meeting.
The upbeat numbers plus stronger than expected earnings growth from tech giants led US stock indices to surge on, with the Nasdaq Composite closing up 2.2 per cent, overshadowing the Dow Jones Industrial Average's 0.1 per cent rise as well as the 0.8 per cent jump in the S&P 500 Index last Friday.
"The fresh week is expected to find earnings remaining centrefold for equity markets," said IG Markets strategist Jingyi Pan.
"It would likely be a telling week for the Q3 earnings season as three-fourths of the companies on the comprehensive S&P 500 index would have delivered their results by end of the week."
On the home front,United Overseas Bank will release its earnings score card on Friday. Singapore will release its early Purchasing Managers' Index (PMI) numbers on Thursday.
Traders will also keep a close watch on several key central bank meetings, chiefly Japan's meeting tomorrow and the US FOMC and Bank of England meetings on Thursday.
Analysts said Japanese Prime Minister Shinzo Abe's landslide victory on Oct 22 should see a continuation of Bank of Japan's ultra-loose monetary policies while the FOMC meeting is not expected to produce changes to policy rates.
On the other hand, Maybank FX Research sees a strong case for Bank of England to conduct "one hike and long pause" by raising rates by 25 basis points this week, although it does not expect this to start a rate hike cycle as the central bank strikes a balance between arresting inflation and ensuring it does not derail growth momentum.
Markets continue to await the choice of the next Federal Reserve chair, expected to be announced by Nov 3.
"The current consensus appears to point to a coin toss between Fed governor Jerome Powell and economist John Taylor. A result reflecting the latter may certainly propel the US dollar further in its recovery," said Ms Pan.
The market will also be monitoring US President Donald Trump's tax bill in the week ahead.
The much-discussed tax reform agenda overcame some legislative hurdles last week, paving the way for actual drafting and negotiation of the bill.
"Regardless of the scope of the initiative and independent of the choice of the chair of Federal Reserve, we see considerable tailwind to the US economy presently, expecting around 2.5 per cent growth next year and in 2019," said DBS Group Research.
Other leading indicators over the week out of the region include China's official and private Caixin PMI gauges, Taiwan's third quarter GDP, inflation updates from South Korea, Thailand and Indonesia.
The local bourse's key Straits Times Index resolutely rammed past the 3,350 resistance level last week and finished at a two-year high of 3,386.44 last Friday, bringing gains so far this year to nearly 18 per cent.
This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts