Fed's silence pushes data to forefront in week ahead

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The Singapore stock market is set to open today with economic data expected to replace Fed-watching as the driver of the week.

US Federal Reserve chair Janet Yellen and European Central Bank (ECB) president Mario Draghi gave speeches over the weekend that had been closely anticipated over the past week.

But the central bankers chose to discuss financial sector regulation rather than monetary policy, giving investors hardly anything to work with.

US markets ended on Friday on a modestly positive note, with the S&P 500 gaining 0.17 per cent, or 4.08 points, to 2,443.05. The Dow Jones Industrial Average advanced 0.14 per cent, or 30.27 points, to 21,813.67.

Ms Yellen and Mr Draghi used their speeches at the Fed's annual Jackson Hole symposium to caution against unwinding the financial sector regulations that were enacted after the global financial crisis and to advocate for free trade.

Little, if any, was said about monetary policy.

Any hints of the central banks' thinking came from outside the speeches.

For the Fed, indications seem to be for the status quo to remain for now. Fed governor Jerome Powell told CNBC that "the time will be here soon" to start to normalise the balance sheet", reiterating the Fed's latest policy statement from July.

CME Fed futures currently suggest a 99 per cent probability that the Fed will stay put at the current 1.00 to 1.25 per cent target for short-term interest rates when its September meeting concludes.

Mr Draghi also made some additional comments that seemed to indicate a preference for accommodative policy at the ECB. That helped the euro to strengthen against the US dollar on Friday.

Fed watchers will now pay closer attention to the economic data in the next two weeks to try to discern what both the Fed and the ECB will do in their coming September meetings.

The US labour report for August will be released on Friday night, Singapore time. Growing discussion about the US debt ceiling and potential tax reform plans could generate volatility in equity markets in the meantime.

Singapore investors will have to shape up their positions by Thursday, however, given that Friday is the Hari Raya Haji public holiday in Singapore.

The latest domestic numbers for Singapore continue to reflect bright times for the manufacturing sector. Industrial production numbers released on Friday showed a 21 per cent year-on-year growth in July.

United Overseas Bank said in a note that it was "optimistic that the robust manufacturing performance that started from 2016 will spill over to this year and support overall GDP".

In China, the purchasing managers' index will come out on Thursday, and investors are expecting slower expansion.

IG market strategist Pan Jingyi wrote in a note: "Significant surprises here would have due effects upon Asian markets, though with economists' long-touted expectations for a moderation in growth into H2, downside surprises will be watched with greater scrutiny to validate any alarm necessary. Watch these numbers closely for Asian and Australian markets alike."

Oil prices could find support from concerns about supply hits in the Gulf of Mexico after Hurricane Harvey struck the Texas coast.

As of late Saturday, Singapore time, the US Bureau of Safety and Environmental Enforcement reported that about 24.5 per cent of oil production and 25.9 per cent of natural gas production in the Gulf of Mexico had been shut-in.

This article appears in The Business Times today. For full listings of SGX prices, go to