Markets Overview

HIGHLIGHTS AHEAD

    US stocks started the week mixed on Monday (15 Sep) with the Nasdaq leading the drop on the back of mixed US data releases with a surprise decline in US August industrial production while the NY Fed Empire state manufacturing survey surged to the highest since October 2009 as markets look cautiously to the Fed Reserve’s upcoming FOMC on 16/17 September and are speculating a higher chance the Federal Reserve will accelerate its timeline to raise interest rates this time. Meanwhile, the US dollar’s recent rally took a breather on Monday as traders stayed sidelined ahead of multi-risk events such as the FOMC followed closely by the Scottish independence referendum on 18 Sep. The euro held its own against the USD but still remained below 1.30-level. After last week’s biggest selloff so far this year, the US Treasury market made some amendments as yields declined across the curve on Monday (15 Sep), although sentiment was still more cautious ahead of the upcoming 16/17 Sep FOMC which may signal a turning point in Fed policy.Oil prices diverged on Monday (15 Sep) with US crude future settling higher but global crude oil futures continuing its downward slide as the investors continued to fret over anemic oil demand growth following the set of weak Chinese industrial and retail data.

    The key event during the Asian trading hours today (16 Sep) will be the release of the minutes from the Reserve Bank of Australia’s (RBA) policy meeting (9:30am Singapore time). Meanwhile, the US data for Tuesday (16 Sep) will be very light with just the August PPI while elsewhere in the developed economies, we have the Japan August condo sales, the German September ZEW survey, the UK August CPI, RPI and PPI, the euro-zone 2Q labour costs, and the UK ONS July house price. Japan markets reopen today after a holiday yesterday (Respect- for-the-aged holiday on 15 Sep).

    China’s August Foreign Direct Investment will be coming due today with consensus expecting a rebound to growth of 0.8% y/y from 16.9% contraction in the preceding month. Sharp drop in July has raised concerns about souring investor sentiment in China.

    Hong Kong Stock Exchange opening could be delayed today as Typhoon Kalmaegi sweeps past the territory.

    Malaysia is holiday today.

    CENTRAL BANK OUTLOOK

    Today (16 Sep) is the first day for the September FOMC meeting with the decision due on 17 September (18 Sep, 2am Singapore time) and it will be followed by Fed Chair Janet Yellen’s scheduled post-FOMC press conference. We continue to factor a regular US$10bn reduction at the September FOMC and we still expect the QE to be fully terminated by the 28-29 October 2014 FOMC with a US$15bn cut as the last step. While we do not expect the Fed rate normalization to take place or even to be announced this time, we will be looking for any material shift in the Fed language within its FOMC statement, specifically whether the Fed will continue to include,” The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends…” The possible removal of the phrase (underlined here) could raise expectations for impending rate hikes and send the dollar strengthening further against the major and emerging-market FX.

    We will have the Bank of Canada Governor Poloz, speaking in Drummongville on and BOJ Governor Kuroda will also be speaking in Osaka today (16 Sep).