Volatility ahead 

The Fed will meet next on September 25-26, and the market is expecting a third rate increase this year. The key factor to keep an eye on is the FOMC rates outlook. If higher, the market may take this negatively as tightening is taking place faster than anticipated. In Europe, ECB will have a policy meeting on September 13 and the market will keep watch on any guidance on policy tightening.
Italy has been in the limelight this month as the new government will reveal its first budget. It is anticipated that the budget deficit might breach the 3 per cent of GDP rule that is applied across all EU members. Italian government is still sitting on high debt at around 130 pe cent of GDP, a similar level seen during the recent European crisis. Investors continued to dump Italian bonds last week, sending its yield to a new high this year.
Trade tensions between the US and China is creating an overhang as Trump has reiterated to apply another US$200bn tariffs on Chinese goods. Besides, the US auto tariff is now more likely if the NAFTA deal is successful.

Thanawat Patchimkul
Head of Research
DBS Vickers Securities (Thailand)