Singapore shares won’t get to enjoy the post-holiday glow for long, with trade restarting on Wednesday with a series of negative leads from Italian politics and U.S. trade tensions rattling markets globally.
Within Singapore, shares of SGX may face a drubbing after the company said it would delay launching its Indian derivative products amid a legal challenge in India.
“There is a flight to safety from European assets beyond the Italian borders sending an Italian Tsunami warning across global markets,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Wednesday.
The Dow Jones Industrial Average shed 1.58 percent on Tuesday, the S&P 500 lost 1.16 percent and the Nasdaq fell 0.50 percent. Futures for the three indexes were trading down early on Wednesday.
Italy may be pushed into another election by July as parliament could soon be dissolved after inconclusive elections in March have failed to result in a government. Analysts believe the upcoming election could turn into a referendum on the euro, with repercussions extending beyond the previous market-wrenching possibility of Greece exiting the eurozone.
“Global risk-off sentiment across all asset classes has Italian politics to blame. Safe havens and the old euro break-up premium assets are in vogue,” Scotiabank said in a note on Tuesday. “The catalysts to global market concerns about Italy are numerous but focused upon political uncertainty, what that may mean to its future in the EU and weak debt auctions amidst a mountain of debt with relatively short maturity profiles.”
The euro was fetching US$1.1537 at 8:00 A.M. SGT, down from levels above US$1.18 last week.
The U.S. dollar index, which measures the greenback against a basket of currencies, was at 94.84 at 8:00 A.M. SGT after starting the week around 94.40 and ending last week around 94.
The Singapore dollar was lower, with the USD/SGD pair at 1.3462 at 8:14 A.M. SGT, compared with levels around 1.3380 on Monday.
“Although sentiment remains positive towards the Singapore economy, price action suggests that the Singapore dollar continues to be driven by external factors. With the combination of dollar strength and risk aversion likely to punish emerging market currencies further, the Singapore dollar has scope to extend losses,” Lukman Otunuga, research analyst at FXTM, said in a note on Wednesday. Otunuga said the pair could challenge 1.3500.
The White House appears to have reneged on its plan to put the U.S.-China trade war “on hold,” saying it plans to announce a list of US$50 billion worth of Chinese goods to target with 25 percent tariffs by June 15, with the tariffs coming soon afterward.
Preparations for a U.S.-North Korea summit to be held in Singapore were continuing, although it remained unclear whether the meeting, which had been canceled by U.S. President Trump last week, would actually occur.
Oil prices remained on the back foot amid concerns supply would rise.
“In addition to the risk-off sentiment, there is ongoing concern that OPEC may increase production to counter negative supply shocks from Venezuela and ongoing uncertainty surrounding Iranian exports,” Scotiabank said.
Nymex WTI crude oil futures for July were up 0.04 percent at 7:55 A.M. SGT at US$66.76 a barrel, down from last week’s highs of around US$72.90, while ICE Brent crude oil futures were up 0.12 percent at US$75.39, after touching highs of around US$80.50 last week, according to Bloomberg data.