The biggest news this week will be about trade. On Saturday, the Wall Street Journal reported that the Trump administration was ready to implement fresh tariffs on Chinese goods worth $200 billion. The news dashed the hopes of a compromise deal between the US and China that rose last week. In response to the threat, Chinese officials said that they will respond to the tariffs by imposing more of their own. The worry among traders is that China might prefer a route of non-tariff methods such as currency devaluation and halting of US treasuries purchases.
Traders will continue to watch the weather and environmental conditions in China and the United States. Over the weekend, Hurricane Florence made landfall in North and South Carolina. While the hurricane was downgraded to category one, the floods led to major destruction in the two states. Historically, hurricanes affect the local economies negatively as people stay out of work. Afterwards, the reconstruction helps boost the economies as people increase their spending. In Asia, the Mangkhut typhoon led to major damages and death to a number of Chinese cities like Hong Kong and Macau. This week, traders will focus on the two environmental catastrophes and assess their impacts to the market.
On Wednesday, the Bank of Japan (BOJ) will release its interest rates decision. Traders expect the bank to leave interest rates unchanged. While other BOJ meetings tend to have no major news around them, traders expect the BOJ to provide a guidance on monetary policy. This is because the Japanese economy is booming, with low unemployment rate. Data released two weeks ago showed that the economy expanded by 3.0% in the second quarter. However, the economy continues to suffer from low rate of inflation, which could force the bank to continue holding negative interest rates for a longer time. The fear is that the low interest rates will cause the economy to overheat and leave the bank with no way of managing a potential meltdown. Two days after the decision, the country will release its CPI numbers.
