Data, trade war news to keep driving market

Economic data will be the focus for Asian investors this week, with highlights including China's gross domestic product (GDP) figures and December Consumer Price Index (CPI) numbers from Hong Kong and Singapore.

China's GDP print for Q4 2018 today is expected to confirm indications from recent trade data that its economy is slowing. IG market strategist Pan Jingyi said the data will likely meet the current consensus for a 6.4 per cent year-on-year increase, slowing slightly from 6.5 per cent in Q3.

That is, unless the industrial production and retail sales data - also due today - disappoint, which would add to downside risks, she said.

Hong Kong releases its December CPI print tomorrow, followed by Singapore on Wednesday. Japan will also unveil its inflation figures for January at the end of the week.

FXTM research analyst Lukman Otunuga said: "As Asia looks to domestic consumption to offset weaker global demand, inflationary pressures may weaken local consumer sentiment."

A few central banks are scheduled to announce monetary policy decisions this week, including the Bank of Japan on Wednesday and the European Central Bank (ECB) and Bank Negara Malaysia, both on Thursday.

None of the monetary policy committees are expected to issue changes, Ms Pan and Mr Otunuga said.

However, Mr Otunuga said investors will scrutinise the ECB press conference for "insight into the health of the EU economy and clues on monetary policy".

US stock markets are closed today for Martin Luther King Jr Day. The country's partial government shutdown has extended into a fifth week and remains at an impasse, even as US President Donald Trump presented his latest proposal for ending it in a televised address to the nation on Saturday.

In exchange for the US$5.7 billion (S$7.7 billion) that he wants for a border wall, Mr Trump offered concessions such as three-year extensions to protections including temporary protected status (TPS) under the Deferred Action for Childhood Arrivals (Daca) policy for young people brought to the US illegally as children.

Senate Majority Leader Mitch McConnell said he would have the Republican-controlled Senate vote on the plan this week, but Democratic leaders indicated that they would reject it.

"It was the president who single-handedly took away Daca and TPS protections in the first place," said Senate Democratic Leader Chuck Schumer.

"Offering some protections back in exchange for the wall is not a compromise but more hostage-taking."

Democratic Speaker of the House Nancy Pelosi plans to have the House vote on its own border security plan instead, which she said will not offer new funding for the border wall but may help reopen negotiations on Mr Trump's demands.

On the US-China trade war front, it comes as no surprise that news from the ongoing negotiations is expected to continue driving markets for the rest of this month, with the key event being an end-January meeting in Washington.

News that drove markets last Friday included a Bloomberg report that China had offered to increase goods imports from the US by more than US$1 trillion over the next six years to reduce its trade surplus to zero by 2024. US stocks extended gains and the US dollar rose after the news.

The report added that US negotiators were sceptical and asked that the imbalance be rectified within two years instead. But economists are doubtful that it is even possible to completely eliminate the trade gap, as it is largely sustained by US demand for Chinese products.

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