Focus remains on US-China trade talks

Last week, sentiment wavered greatly on worries that the resilient US economy is showing signs of a slowdown, with most now anticipating the US Federal Reserve to lower interest rates during its October meeting.

With that in mind, investors are likely to look to the slew of Fed speeches this week as well as minutes from last month's meeting for clues to whether such a move could be made.

More importantly, market watchers will be looking to the 13th round of high-level US-China trade talks on Thursday and Friday as a key event that could shape risk appetite until year's end.

FXTM market analyst Han Tan said: "Should this week's trade talks come to naught, that could fuel more risk aversion and dampen demand for riskier assets, amid escalating concerns over the global economic landscape."

The talks are also coming at a crucial time with Washington set to raise tariffs on US$250 billion (S$345 billion) of Chinese exports to the US to 30 per cent on Oct 15.

Last Friday, investors on Wall Street heaved a sigh of relief as its three key indices all posted gains of 1.4 per cent, especially after three days of disappointing US data releases.

The Dow Jones Industrial Average finished at 26,573.72, the broad-based S&P 500 ended at 2,952.01, and the tech-rich Nasdaq Composite Index closed at 7,982.47.

Despite the late-week jump, the Dow and S&P 500 still closed lower for the third straight week but the Nasdaq managed to eke out a slight gain.

The reason for an uptick in sentiment was the US economy adding 136,000 jobs in September, while the unemployment rate hit a new 50-year low of 3.5 per cent.

But with the pace of job creation slowing and wages falling, there are concerns that US household spending will not be able to support the economy.

LOCAL MARKET

In the local market, the Straits Times Index ended last week at 3,078.36, falling 9.61 points or 0.3 per cent. The blue-chip index shaved off 47.27 points or 1.5 per cent from Sept 27's close of 3,125.63.

It is a data-light week in Singapore, with just August's retail sales data in the docket, to be released on Friday.

The second week of October is also indicative of the time the Monetary Authority of Singapore (MAS) will release its October Monetary Policy Statement (MPS). It is announced in conjunction with Singapore's preliminary Q3 gross domestic product (GDP) growth data.

"As the MAS typically announces the MPS release date seven days in advance and the MPS is expected to be released no later than Oct 14, we therefore expect the MAS to announce on Monday that the October MPS will be released on Oct 14," UOB economist Alvin Liew said.

Maybank analysts have said MAS is likely to reduce the slope of the Singapore dollar nominal effective exchange rate (S$NEER) to 0.5 per cent from the current 1 per cent appreciation path at the upcoming review.

"Considering the headwinds that are currently buffeting the worldwide economy, MAS is expected to join the global trend of easing policy settings to support the domestic economy," FXTM's Mr Tan noted.

Elsewhere in the region, China returns from its Golden Week celebrations tomorrow but today will see the release of September foreign reserves.

The Caixin services Purchasing Managers' Index for September, which focuses more on smaller- and medium-sized firms, will be released on Wednesday.

Meanwhile, August trade figures for the Philippines is due on Thursday while Malaysia's August industrial production figures will be released on Friday.

A number of markets will have a shortened week as well. Hong Kong and Australian markets will be closed today. India will be closed on Tuesday and South Korea on Wednesday.