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Trade talks, data to give market direction

This article is more than 12 months old

Investor sentiment see-sawed in the past week, with Asian markets starting on a high from news of a 90-day US-China trade truce, only to be foiled by doubt and subsequently, the arrest of Huawei's chief financial officer in Canada over potential violations of US sanctions on Iran.

This came amid concerns over the outlook of the US economy due to an inversion of a segment of the US treasury yield curve, which is widely regarded as an early indicator of a potential economic recession.

But as markets head into the final weeks of the calendar, the question on many investors' minds is whether there will be some upside to close the year out.

In its weekly market view, Standard Chartered's wealth management group said it expects equity markets to be set for a strong recovery into the year-end, with Asia ex-Japan equities showing resilience following the sharp US market sell-off last week.

The team added that trade talks between China and the US were a good start and "the respite might be enough to support emerging market assets in the near term".

"That said, geopolitical tensions are unlikely to go away, as reinforced by the arrest of a senior China tech company official," they added.

Last Friday's November non-farm payroll data release saw the US economy add another 155,000 jobs - below the forecasted figure of 189,000 - while October data were revised lower to 237,000 from the first estimate of 250,000.

Charles Schwab Singapore's managing director Greg Baker said: "The market was surprised by lacklustre US job numbers in November, but the good news is that average hourly earnings are up slightly, and unemployment remains low."

However, Mr Baker added that any weaknesses in the US economy are likely to heighten investor concerns in the market looking ahead.

Meanwhile, FXTM research analyst Lukman Otunga said: "Although the unemployment rate remained unchanged at 3.7 per cent, the overall US jobs report remains dollar-negative and is likely to create some uncertainty over the Fed's hiking path beyond December."

Opec+ members also reached an agreement to cut production on Friday. Mr Otunga said: "This breakthrough in talks is a welcome development for financial markets and is seen as supporting risk sentiment during the (this) trading week.

"With Opec agreeing to cut oil production (by more) than initially expected, oil prices are poised to extend gains in the short term. However, the medium to longer term outlook remains open to question."

Official data released on Saturday showed that China's trade surplus with the US hit a record in November, even as overall export growth slowed amid waning global demand and uncertainty about a constructive resolution to the trade war.

Another event that could weigh on investor sentiment this week is the UK House of Commons' verdict on Prime Minister Theresa May's Brexit deal, scheduled for tomorrow.

On the Singapore economic docket for the week will be Wednesday's retail sales figures for October. Thursday will see the release of the Q3 unemployment rate.

A number of economic data releases for November will be out towards the end of the week in China. This includes Friday's industrial production and retail sales figures for the month.

In Japan, GDP figures for Q3 are due today while PPI for November will be out on Wednesday.

Across the causeway, industrial production figures, as well as retail sales and unemployment figures for October will be released this week.

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