Tariffs, Fed meeting to rule markets this week

Trade and the US Federal Reserve meeting will continue to dominate headlines, with the latest raft of tariffs on Chinese imports to take effect today.

The Federal Open Market Committee decision is due on Wednesday (2am, Thursday, 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 surprises expected. Instead, it is the economic forecast that will be worth paying attention to, and observers expect projections to be more hawkish than dovish.

The S&P 500 and Dow Jones Industrial Average reached record highs on Friday ahead of today'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.

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 tomorrow and the final reading for the second-quarter gross domestic product 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 the breakout further renews momentum for the market. That said, she forewarns that this is "not yet cause for celebration".

For the Singapore market,last month's consumer price index and industrial production data will be out today and on Wednesday respectively.

The end of the month also brings forth the usual bank lending and monetary aggregates data for last month 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 that will continue well into the week, with China and Taiwan markets closed today, and Hong Kong out for tomorrow. Meanwhile, South Korea will celebrate Chuseok till Wednesday.

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, the Philippines, Indonesia and Taiwan, noted United Overseas Bank in its weekly outlook.

On the currency front, the pound sank to US$1.3078 (S$1.78) 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 (S$1.36) on Friday, and the euro edged down to US$1.1747.

Said FXTM's global head of currency strategy and market research, Mr 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 the Sing dollar will seek guidance from the US dollar when it comes to any potential fluctuations."

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