Tariffs, FOMC meeting in spotlight this week

TRADE and the US Federal Reserve meeting will continue to dominate headlines in the week ahead, with the latest raft of tariffs on Chinese imports to take effect on Monday.

The Federal Open Market Committee (FOMC) decision is due on Sept 26 (Sept 27, 2am Singapore time), which will be followed by Fed chairman Jerome Powell's press conference. Analysts' consensus points towards a 25 basis points rate hike, with no major surprises expected. Instead, it is the economic forecast that will be worth paying attention to, and market observers expect projections to sound more hawkish than dovish.

The S&P 500 and Dow Jones Industrial Average reached record highs on Friday ahead of Monday's major sector reshuffle, capping a week that largely shrugged off trade worries.

The Dow rose 0.32 per cent to 26,743.5, the S&P 500 lost 0.04 per cent to 2,929.67, and the Nasdaq Composite fell 0.51 per cent to 7,986.96. Analysts attributed the Dow's gains to solid US economic data and greater investor optimism after fresh actions from the US and China did not seem to cast repercussions as severe as many had feared.

Meanwhile, trading volume spiked to the highest level since Feb 9 in anticipation of the S&P 500 sector shuffle, where various stocks, including big names such as Facebook, Alphabet and Netflix will be moved to a rebadged Communications Services sector.

Other US economic data worth keeping a lookout for include September's consumer confidence index on Tuesday, and the final reading for the second-quarter GDP on Thursday, followed by the Fed balance sheet data on Friday.

IG market strategist Pan Jingyi noted that the resilience in the US market is evident, and that the breakout further renews momentum for the market. That said, she forewarns that this is "not yet cause for celebration", as uncertainties still remain.

For the local Singapore market, August's consumer price index (CPI) and industrial production data will be out on Monday and Wednesday respectively. The end of the month also brings forth the usual bank lending and monetary aggregates data for August on Friday.

Added Ms Pan: "The local Straits Times Index had exhibited a substantial recovery into the latter half of the week, with the leap back above the 3,200 handle that would likely serve as a support in the coming week above the 3,114 stronghold."

Also on the the agenda are mid-Autumn festivities which will continue well into the week, with China and Taiwan markets closed on Monday, and Hong Kong out for Tuesday. Meanwhile, South Korea will celebrate Chuseok from Sept 23 to 26. It will also be a "Super Thursday" this week, with monetary policy decisions expected on the same day from four major Asian-Pacific central banks, namely New Zealand, Philippines, Indonesia and Taiwan, noted United Overseas Bank (UOB) in its weekly outlook.

On the currency front, the pound sank to US$1.3078 after Prime Minister Theresa May said the UK and the European Union were at an impasse on Brexit, while the greenback firmed to 112.52 yen on Friday, and the euro edged down to US$1.1747.

Said FXTM's global head of currency strategy and market research, Jameel Ahmad: "With exception of the latest inflation report, the economic calendar from the side of Singapore is thin in volume over the upcoming week. This means that the Singapore dollar will seek guidance from the US dollar when it comes to any potential fluctuations."

Nonetheless, he believes the Singapore dollar will benefit on rising consensus that the greenback has peaked and may soon enter into a period of sustained weakness.

For the full listing of SGX prices, go to btd.sg/BTmkts