Singapore pre-market Monday: US-North Korea summit eyed, dollar slips, oil tumbles

Singapore street sceneSingapore street scene

Sentiment in Singapore’s market may get a fillip on Monday amid signs the U.S.-North Korea summit might be back on after it was abruptly canceled late last week.

Trade may be thin as U.S. markets will be closed for the Memorial Day holiday on Monday, while Singapore’s markets will close on Tuesday for Vesak Day.

On Friday, the Dow Jones Industrial Average fell 0.24 percent, the S&P 500 shed 0.24 percent and the Nasdaq edged up 0.13 percent. Futures for the three indexes were pointed solidly higher, with DJIA futures up 106 points at 8:06 A.M. SGT.

In Japan, the Nikkei 225 opened higher, trading up 0.31 percent at 8:05 A.M. SGT.

Whether there will be a U.S.-North Korea summit remained up in the air after U.S. President Trump issued a strangely worded and self-contradictory letter on Thursday canceling the meeting, and then later said it might yet proceed. Singapore reportedly unfroze leave days for police officers for a few hours, before refreezing it, and the Straits Times reported hotels were juggling whether to release rooms.

But U.S. officials were proceeding with meetings, including crossing into North Korea over the weekend for preparatory talks, the Washington Post reported.

When it comes to the markets, however, Societe Generale said the risks of the potential summit were skewed to the downside as little had been priced in and any positive economic developments could be years in the making.

Others noted that other geopolitical tensions would remain unresolved for now.

“All roads do lead to Singapore, at least on June 12 anyway, as the Trump-Kim Summit is (apparently) going ahead – which should be risk-friendly news for the markets. But with USTR final decision on Section 301 tariffs looming the markets are not jumping for joy just yet,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Monday.

U.S. dollar

The dollar index, which measures the greenback against a basket of currencies, was at 94.08 at 8:17 A.M. SGT, compared with levels as high as 94.26 on Friday.

Lukman Otunuga,, research analyst at FXTM, said that even with a holiday-shortened trading week, the dollar was likely to be in focus ahead of key U.S. gross domestic product and non-farm payroll figures due this week.

“Dollar bulls could elevate the dollar index to fresh 2018 highs if both GDP and non-farm payroll numbers exceed market expectations. Taking a look at the technical picture, the dollar index remains heavily bullish on the daily charts,” Otunuga said.

The U.S. dollar was fetching S$1.3399 at 8:27 A.M. SGT after opening trade around S$1.3431, according to Bloomberg data.

Oil

Oil prices were sharply lower.

Nymex WTI crude futures were at US$67.37 a barrel at 8:09 A.M. SGT on Monday, compared with levels as high as US$72.90 last week, while ICE Brent futures were at US$76.02 after touching levels as high as US$80.50 last week, according to Bloomberg data.

“Given oil market positioning, prices were going to be susceptible to the slightest bearish news. Russia, Saudi Arabia and the UAE’s comments after the St. Petersburg meeting hinted that the cartel was considering providing more supply to offset the Iran and Venezuela supply disruption,” OANDA’s Innes said.

China data

Over the weekend, China industrial profits for April rose 21.9 percent on-year to 576 billion yuan, compared with 3.1 percent on-year growth in March, while for the January-to-April period profits rose 15 percent on-year.

Nomura said in a note on Sunday that the improvement in profit growth was “almost across the board,” but it added that it remained cautious.

“With domestic demand weakening and PPI inflation moderating this year, and given a high base last year, we believe that the downtrend in profit growth has not changed and the rebound in April should prove to be a brief one,” Nomura said.

Separately, Scotiabank said China PMI data, with both official and private figures due later this week, would be closely watched.

“They are May readings and so we are pushing well past the Lunar New Year distortions and into the cleaner period during which it is easy to evaluate growth momentum,” Scotiabank said in a note on Friday. “PMIs are likely to continue to indicate that broad growth remains modest, but a risk is whether U.S.-China trade tensions begin to show up as a drag effect on activity and sentiment.”