The week ahead


QL Resources Bhd and Astro Malaysia Holdings Bhd will be announcing their results this week.

Jobless rate

UNEMPLOYMENT data will dominate the economic news flow this week. This will give market watchers a clearer picture of the current economy.

Economists expect an increase in the jobless rate due to movement control order (MCO) on the labour market.

According to the Statistics Department, the unemployment rate in March 2020 increased to 3.9%, which is the highest recorded in the country since June 2010, when it was at 3.6%.

The high unemployment rate in March has contributed to an overall higher unemployment rate for the first quarter of the year 2020, which was recorded at 3.5%.

In addition, there will also be a couple of corporate earnings scheduled for this week including QL Resources Bhd and Astro Malaysia Holdings Bhd.

Central banks up for more rate cuts

INDONESIA, Taiwan and Japan will decide policies this week. Taiwan and Indonesia, which last reduced interest rates in March, are expected to cut policy rates further. Japan is likely to stay on hold.

ING, in a report said the Central Bank of China (CBC), Taiwan’s central bank is expected to continue with its piecemeal policy easing and cut the interest rates by another 12.5 basis points to 1.0%, an all-time low.

According to ING, Bank Indonesia will be back in action next week, delivering another 25 basis points policy rate cut to 4.25%.

Indonesia’s GDP growth has slowed sharply and inflation has been subdued, warranting more policy accommodation. Moreover, the usual headwind for Bank Indonesia easing, the weak currency, has been absent; the Indonesian rupiah has been an emerging market outperformer since April. If continued, these trends will open doors for more Bank Indonesia rate cuts ahead.

UOB Global Economics and Markets Research expects CBC to keep their policy rate unchanged at 1.125%.

While further rate cuts are not ruled out as current deflation provides them with the room to cut rates, UOB thinks further easing is looking less certain at this point given the official forecast for a strong rebound in second half growth to around 2.3% year-on-year from around 1.0% projected for the first half.

China data

THE focus on China is its production and retail sales data that are eagerly awaited to assess the extent to which economic activity may be recovering from the lockdown.

China’s data will be especially interesting as a potential guide to output for other countries in coming months as China relaxed its lockdown measures earlier and has now seen both manufacturing and services return to growth, fuelled by rising domestic demand.

China’s factory output for the first time in 2020 in April. Industrial production climbed 3.9% in April from a year earlier.

Consumer spending remained weak in April with retail sales falling 7.5%, faster than the forecast 7% decline and extending the tumble in the first three months of the year.

US retail sales, industrial production

THE US will be releasing its fresh numbers on retail sales and industrial production for May.

The data will be eagerly awaited for confirmation that the worst of the economic downturn from the pandemic has passed.

IHS Markit said given that the reopening of production facilities in May, an increase in output looks likely, though the latest PMI data indicate that many companies continued to struggle amid collapsing demand, highlighting how output is likely to remain far below levels seen at the start of the year.

IHS Markit PMI surveys, which fell into contraction back in February, look to have bottomed out in April, rising in both manufacturing and services in May.

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