Investors to go gaga over data this week
KEY China factory data and minutes of the Federal Reserve's meeting last month, which could shed more light on the timing of United States interest rate hikes, are set to be keenly watched this week.
Investors will be looking for fresh cues as the local corporate-earnings season draws to a close.
The Straits Times Index, which ended 0.3 per cent higher for the week at 3,463.10, is expected to "stay in consolidation mode" ahead of the Federal Open Market Committee's release of the minutes on Wednesday, IG market strategist Bernard Aw said.
The Fed has said it will raise interest rates when it sees further labour-market improvement and is "reasonably confident" that inflation will move back to its 2 per cent goal over time.
"There may be a short-term positive reaction if the Fed's language stays the same or is slightly positive, meaning they continue to be data-dependent and still see a strong rebound in the second quarter, because the weakness in the first quarter was due to transitory factors such as bad weather. Then that will raise expectations that the rate hike may come by September," Mr Aw said.
"But this data-dependent approach has created a lot of volatility in stock markets, because investors are now watching all data (like non-farm payrolls, retail sales and inflation) for clues on interest rates," he noted.
Fed Chairman Janet Yellen's strategy of letting economic data drive the central bank's decisions on raising interest rates - a departure from six years of explicit guidance - calls for adjusting policy according to how the economy evolves.
A slew of US housing data this week could also offer more clues on the speed of the US economy's recovery from the first-quarter slump. The US Commerce Department data tomorrow is expected to show that housing starts jumped to a 1.02-million-unit pace last month, from a 926,000-unit rate in March. On Thursday, the National Association of Realtors is expected to report that existing home sales increased to a 5.24-million-unit rate last month from a 5.17-million-unit pace in March, as buyers took advantage of cheap borrowing costs at the start of the busy spring selling season.
In Singapore, traders noted that market turnover has slipped in recent weeks to daily averages below $1 billion.
Citing Bloomberg data, Mr Aw noted "only seven of 26 companies that have reported their latest quarterly earnings this season beat analyst estimates".
"That's not too positive, and it may have led to investors feeling they shouldn't enter the market."
Other data to be released includes Singapore's non-oil domestic exports (Nodx) for last month, out today.
Nodx shipments are forecast to have fallen last month, a Reuters poll showed, indicating that sluggish global growth may hobble shipments from Singapore despite emerging signs of a pickup.
In March, Nodx jumped 18.5 per cent year-on-year after a 9.7 per cent fall in February, owing to growth in both electronic and non-electronic Nodx. The European Union, US and Malaysia were the three biggest contributors to Singapore's export expansion in March.
The local market may also take its cue from China's manufacturing purchasing manager's index (PMI) reading for this month from HSBC and Markit Economics, which will be released on Thursday. Last month, China's manufacturing PMI slipped to its lowest in a year at 48.9, stoking expectations of further central bank stimulus.