Asian markets were mixed last week, with the China A50 ending positive for the week with a gain of 1.6% while the Hong Kong (HSI futures: -3.2%) and Singapore markets (STI: -2.3%) ended in the red.
 
PBOC intervenes yet again
The conflicting movements were of no surprise given that the Chinese stock market was buoyed by the People’s Bank of China liquidity injection. The central bank pumped 120 billion yuan into the money market last Thursday, following a series of reverse repos on Tuesday. However, the declines from HSI and STI were mainly due to signs of weakness in China’s economy. China announced HSBC flash PMI figures which disappointed as it showed indications of a contraction for the first time in five months.
 
The S&P 500 Index also suffered a decline of 2.09% on Friday, clocking its largest weekly decline in more than a year, since June 2012.
 
Yellen makes history
Investors this week will be watching developments in the US eagerly as the FOMC holds its final meeting under Chairman Ben Bernanke. His tenure will end on the 31 Jan after which Janet Yellen will create history by officially taking over the helm as the first female leader in the history of the Federal Reserve. Yellen previously said that it is “imperative that they do what they can to promote a very strong recovery”. However, her challenge would be to scale back on the Fed’s economic stimulus program without triggering a rise in bond yields or pushing down inflation.
 
Expectations of further tapering during FOMC
The FOMC meeting will conclude on Wednesday and economists from the Bloomberg survey are expecting the central bank to trim bond purchases in $10 billion increments over the next six meetings before announcing an end to the bond-purchase program no later than December.
 
The next day, the Commerce Department will report US GDP figures. Expectations are lower this quarter and economists are expecting a 3.2% increase qoq. The previous quarter showed a 4.1% increase.
 
Revisiting Greece’s debt progress
In Europe, the group of 18 euro-area finance ministers will begin a two-day meeting in which they will discuss Greece’s progress in meeting the terms of its bailout program. According to a senior European Union official, the euro zone will assure the International Monetary Fund in the coming months that it will continue to bankroll Greece, enabling the IMF to disburse its share of international aid to Athens.
 

Key Macro Data this week
Mon 27 Jan: BOJ 19-20 Dec meeting minutes, US New home sales
Tue 28 Jan: US Durable goods orders, US Consumer confidence index
Wed 29 Jan:US QE3 pace, US FOMC rates decison
Thu 30 Jan:Germany unemployment rate, Germany CPI, US GDP, US personal consumption, US initial jobless claims
Fri 31 Jan:Japan CPI, Eurozone CPI

Source: Macquarie Research - 27 Jan 2014