Asia markets are expected to be more resilient in the week ahead after a four-day-rebound in US stocks. Investors have improved their risk appetites and speculated a bottom reversal of the broader markets amid the US Federal Reserve’s monetary policy, retreating oil prices, optimism towards ceasefire talks in the Ukraine-Russia war, and Beijing’s pledge to stabilize the financial markets, despite the central banks’ accelerating pace on tightening, ongoing global high inflation, Russia’s continuation of aggression to Ukraine, and widening lockdowns in China.
Key Points
- Oil prices are under pressure as Iran nuclear negotiation weighs
- S&P 500 is to cross the key resistance at the 200-day moving average after the best week since November 2020
- Commodity currencies, such as AUD and NZD, strengthen the most amid strong commodity prices and border reopening
- China is expected to loosen the monetary policy further
Instruments to be watched
Crude Oil
Oil prices reclaimed US$100 last week after falling to a pre-war level but finished lower for the week, registering the second consecutive week of decline. Investors’ focus will return to the oil markets since the Fed clarified its policy last week. The hope towards a near-deal of the Iran nuclear negotiation might offer downside pressure on the crude price. Optimism looms after US and China agreed on working for peace in Ukraine despite neither party compromising its stances on the war. See current oil prices.
US stocks
The major US indices are to test pivotal technical resistance in the coming week after the four days of a rebound in a row. The S&P 500 had a bullish breakout above the descending trend line formed from the January peak and closed just under the 200-day moving average last Friday. Whether the peace talk and moderating oil prices would provide more optimism to risk assets will be the key focus. Watch US stocks here.
Commodities currencies
The commodity currencies, especially AUD and NZD, strengthened further after the FOMC meeting providing no shock to the risk-on sentiment, both of which are up 6% against the greenback since the end of January. However, a stronger USD might be approaching with the hawkish Fed’s stance. And moderating commodity prices could keep the commodity currencies in check. Check-in on AUD, NZD movements.
Key economic data and events
US durable goods orders, flash PMI, and consumer sentiment, Fed chair’s speech
It is a relatively quiet week for the economic front. A slew of US economic data, including the February new home sales, durable goods orders, and final fourth-quarter GDP, March manufacturing and services flash PMI, will be released from Thursday to Friday for investors to gauge US economic growth.
The Fed chair Jerome Powell will speak at the NABE conference on Monday and BIS panel on Wednesday, which could provide more clues of the central bank’s stance on monetary policy and digital world regulations.
China’s loan rates announcement
China will announce its 1 and 5-year Loan Prime Rates on Monday. A further cut in its loan rates is expected in the backdrop of a worsening economic environment and geopolitical uncertainty.
RBA governor speaks
The RBA governor Philip Lowe will speak on the Walkley Awards for Business journalism 2021 on Tuesday, which could give hints if the central bank will change its stance to be more hawkish. The Australian labor markets have been very strong, with the unemployment rate dropping down to 4.0% in February, the lowest since 2008.
New Zealand trade balance
A hawkish central bank policy and a strengthening NZD provide headwinds for its exports. Monday’s February trade balance data will give clues for how the economy performs with a strong dollar.
SNB policy meeting
The Swiss National Bank is not expected to change its monetary policy to keep the policy rate at -0.75%. The central bank is most likely to reiterate on intervening to keep the Swiss Franc down to support the economy.
Europe’s Week Ahead
- The UK February’s CPI reading is expected to show a further rise in UK inflation
- British retailer Next is due to announce preliminary full-year results
- Germany, France flash PMIs are on watch
- Read more
