Singapore pre-market Tuesday: Wall Street rallies, oil climbs, trade tensions ease

Singapore one dollar bill

Singapore’s shares appeared set to start trade with some positive cues on Tuesday, after a Wall Street rally on signs of easing U.S.-China trade tensions.

The Dow Jones Industrial Average was up 1.21 percent on Monday, the S&P 500 added 0.74 percent and the Nasdaq gained 0.54 percent. Futures for the three indexes had turned their noses slightly down early on Tuesday.

The Nikkei 225 index was down early on Tuesday, shedding 0.12 percent by 8:14 A.M. SGT.

STI Futures were up 25 points at 3553, according to Bloomberg data, a tad above the index’s close at 3548.23 on Monday.

U.S. Treasury Secretary Steven Mnuchin said the trade war was being put on hold and tariffs wouldn’t be imposed while the U.S. tries to execute the framework from the talks. China over the weekend agreed to “significantly” increase its imports of U.S. goods and services, but the official statements lacked specifics.

To be sure, U.S. President Trump has a history of undermining other members of his administration at the drop of a hat, but analysts were positive on the outcome.

“We view this as the best deal for China,” Nomura said in a note on Monday. “Increasing imports should have a limited impact on China’s growth, while opening China to foreign goods, services and investment will, on the whole, serve China well.”

Nomura also noted that an increase in imports would be disinflationary for China at a time when its labour force and available land are contracting.

Oil climbs

Oil prices continued to climb, amid concerns about the potential for Venezuela’s crisis to deepen as the U.S. imposed new sanctions aimed at preventing corrupt officials from enriching themselves by via state assets, according to a Washington Post report. The report said U.S. President Trump signed the order.

Additionally, the U.S. stepped up Iran tensions, with Secretary of State Mike Pompeo reportedly said the Trump administration would use all its economic and military resources to “crush” Iran.

Nymex WTI crude futures for June were up 0.39 percent at US$72.52 a barrel at 7:46 A.M. SGT, while ICE Brent crude futures were up 0.90 percent at US$79.22 at 5:59 A.M. SGT, according to Bloomberg data.

DBS raised its forecasts for oil in a note last week, factoring in increased geopolitical risks from the Iran nuclear deal breakdown, better-than-expected complaince with OPEC production cuts, declining production in crisis-hit Venezuela and faster-than-expected inventory normalization trends. It raised its 2018 average Brent crude oil forecast to US$70-US$75 a barrel, up from US$60-US$65.

The U.S. dollar index, which measures the greenback against a basket of currencies, was at 93.56 at 8:09 A.M. SGT, broadly steady with U.S. trade and down a tad from around 93.64 on Friday, but still well above the around 92.59, where it started last week.

Stephen Innes, head of Asia Pacific trading at Oanda, said in a note on Tuesday that U.S. traders were taking profit on the greenback on Monday after its climb.

“The shifting dynamics around trade and tariffs does give pause for thought as U.S. dollar bulls are consolidating gains at a very tricky and treacherous junction for both the U.S. dollar and U.S. bond yields,” he said. “Also, there’s the usual air of uncertainty with both May FOMC minutes and  April ECB minutes due this week. Traders will be more inclined not to get ahead of the curve before these releases.”

Separately, tensions on the Korean peninsula will be at the back of the markets minds, with reports emerging that U.S. security adviser John Bolton may have precipitated North Korea’s threat to walk away from talks with Trump by proposing a “Libya solution” for denuclearization.

Another wrinkle for the market will continue to come from the investigation into the Trump campaign’s ties to foreign powers. AP News reported that a Trump fundraiser cultivated crown princes from Saudi Arabia and the U.A.E., pitching the ability to deliver messaging directly to Trump.

This article was originally published on Tuesday, 22 May 2018 at 8:37 A.M. SGT; it has since been updated.