Chinese markets will be back in action after a week-long holiday and September economic data also starts to come through. But the highlight of the week will be Singapore's GDP numbers, where a significant slowdown will undoubtedly take the air out of central bank policy hawks
After a soft September, the US dollar seems to be regaining its strength against most G10 and emerging Asian currencies. While there is nothing on the calendar to unsettle this, but all eyes will be on the People’s Bank of China's yuan fixing after the holiday. The USD/CNY fixing ground was higher in the week before the holidays, and the market spot almost followed suit. The US dollar’s comeback and heavy stock market sell-off in Hong Kong this week, possibly spilling over to Mainland China suggests CNY will resume trading on a weaker note.
China’s September data also influences the markets, starting with the foreign reserves data to be released over the weekend followed by trade and monetary data over the course of the week. Unlike the CNY devaluation in 2015, when reserves experienced significant outflows, they have been pretty stable around $3.1 trillion despite the steep yuan depreciation this year. We believe this state of affair prevailed in September, as the trade war impact has yet to show up in the real activity and exports continue to grow by the high single-digit pace.
General market tone: risk off. A hawkish Fed and continued robust economic numbers out from the United States saw the Treasury yield jump weigh on global markets.
Recent market moves are like a game of chicken between optimists - geared up by tax-cut fuelled economic growth, and pessimists weighed down by rising valuations and borrowing costs. What happens next in aggregate may be determined by the tiniest of changes in sentiment