Hold your breath for jam-packed week

Ever-pessimistic Eeyores may be sighing in vindication, after global risk buckled up for a rollercoaster ride. And the tensions could well carry over into the next few days.

No sooner did the US Treasury Secretary pronounce a trade war with China "on hold" last week than his president declare himself "not satisfied" with bilateral talks.

And no sooner had North Korea professed its nuclear facilities dismantled than US President Donald Trump called off a planned summit that would have been held here next month, in a move that United Overseas Bank's global economics and markets research team called "the biggest geopolitical bombshell of the week".

In a further twist, South Korean President Moon Jae In said yesterday that North Korean leader Kim Jong Un had reiterated his strong commitment to denuclearisation and willingness to meet Mr Trump.

DBS economists Taimur Baig and Irvin Seah have warned that people should brace themselves for an earnings downgrade in Asian equities.

"As the global synchronised recovery starts to show signs of fatigue, earlier high expectations that the recovery is sustainable will have to be toned down," they wrote.

"In the near term, macro headwinds of volatility in the currencies, oil prices, interest rates and trade wars should pose further risks to Asia corporate earnings for most sectors and we expect more downgrades by the street in the second half."

"With concerns likely to heighten over renewed geopolitical tensions on the North Korean peninsula impacting investor appetite, risk aversion may intensify," said Mr Lukman Otunuga, a research analyst at currency broker FXTM, adding that developments only underscored "how highly unpredictable the Trump administration can be".

With concerns likely to heighten over renewed geopolitical tensions on the North Korean peninsula impacting investor appetite, risk aversion may intensify. Mr Lukman Otunuga, a research analyst at currency broker FXTM

He added: "There is a strong possibility that the aggressive rhetoric Mr Trump adopted in the summit cancellation letter strains the US-North Korea relationship further."

But Mr Eli Lee, head of investment strategy at the Bank of Singapore, had a different reading of the matter, arguing that both sides have indicated a continued openness to future dialogue.

"The market correction may have been premature, in our view. We advise for clients not to overreact, but stay engaged and nimble in the market," he said.

Traders might be able to enjoy a brief reprieve after the weekend. The US will be shut for Memorial Day and Britain for its spring bank holiday, both today, while Singapore and several neighbouring markets close tomorrow for Vesak Day.

Still, on top of the drama coming out of the White House, markets will also have to digest not just last week's economic data - such as Singapore's latest inflation, factory output and gross domestic product (GDP) numbers - but also the figures that are coming out this week.

Forthcoming figures include US GDP numbers on Wednesday and jobs numbers on Friday; Japanese retail sales on Wednesday and industrial production data on Thursday; and China's purchasing managers' index readings on Thursday.

IG Asia market strategist Pan Jingyi said: "Key markets in the region, including the likes of the Nikkei, Hang Seng Index and Straits Times Index (STI), can be seen caught in consolidation, certainly still hunting for direction with the jam-packed week of tier-one (data) releases ahead."

The STI closed last Friday at 3,513.23, down by 0.45 per cent on the week before.

Ms Pan predicted an immediate support level of 3,509 for the index at the re-open, with resistance to be seen at 3,550.

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