Ahead Today
G3: US ISM Manufacturing, ISM Manufacturing Prices Paid, JOLTs Job Openings
Asia: China Caixin Manufacturing PMI, Indonesia CPI
Market Highlights
As markets entered 2024 with a dash of optimism given increasing hopes of rate cuts by global central banks and lower inflation, two key developments raised some risks around those expectations. First, the global shipping industry witnessed another scare in the Red Sea over the New Year holidays, following an attack on the Maersk Hangzhou container ship by Houthi military rebels. The US military said its helicopters intercepted the attack and sank three Houthi “small boats”. Following the attack, Maersk has imposed a 48-hour delay on its vessels moving through the Red Sea, potentially adding further to global shipping delays. The Shanghai Container Freight Index has risen by more than 40% week-on-week to its highest since 2022, and if sustained, could raise some risks around further goods disinflation through the year.
The second key risk is on China’s growth prospects. China’s Manufacturing PMI was much weaker than expected at 49.0 compared with consensus expectations of 49.6. While part of this was likely due to the colder than usual weather, it points to continued downside risks to China’s growth, and should also mean further stimulus by authorities.
Looking ahead, markets will focus on US ISM Manufacturing and JOLTs jobs opening data points.
Regional FX
Asian FX were generally mixed against the Dollar to start the year, with USDCNH at 7.12 and USDSGD at 1.32. Singapore’s 4Q provisional GDP estimate was much stronger than expected at 1.7% qoq sa and 2.8%yoy. This was driven up by a sizeable 9% qoq bounce in manufacturing, together with a further improvement in construction activity, all of which helped to offset a slowdown in services activity. The improvement in Singapore’s manufacturing and in particular electronics production is likely driven partly by capacity expansion, but is also in line with improvements in the electronics cycle that we see across the region including out of Korea and Taiwan. We expect MAS to keep its exchange rate policy on hold through 2024 with inflation gradually moderating while growth also improving. We forecast USDSGD to move in line with the Dollar, with USDSGD at 1.29 by end 2024.
