Singapore pre-market Friday: Trade war heats up, dollar-sensitives likely in focus

Singapore portSingapore port

Singapore shares were set to start the last trading session of the week on the back foot, with the Trump administration’s fresh salvos in its trade war met with return fire from its targets.

Singapore stocks to watch Friday: Sembcorp, Keppel, OUE Hospitality

Trade-sensitive stocks may be in focus. Tech-related companies with China exposure, such as Hi-P, may face some jitters, even though the latest measures weren’t aimed at China.

Stocks with U.S. dollar sensitivity, such as Yangzijiang, may also be in focus amid fresh U.S. economic data showing solid growth. The U.S. nonfarm payrolls data, due later in the global day, will also be watched closely for cues on how aggressively the U.S. Federal Reserve might hike interest rates. That may also put Singapore’s banks into focus as higher U.S. rates will likely filter through to boost their net interest margins.

The Dow Jones Industrial Average fell 1.02 percent on Thursday, the S&P 500 was off 0.69 percent and the Nasdaq lost 0.27 percent. Futures for the three indexes were a tad higher early on Friday.

The U.S. launched its tariffs on steel and aluminum imports from Canada, Mexico and the European Union on Thursday, which spurred retaliatory moves from Canada and Mexico. The EU also has retaliatory measures set to take effect. The retaliatory tariffs have largely been aimed at products from U.S. states which voted for U.S. President Trump and for key Congressional Republicans.

Reuters cited U.S. Chamber of Commerce President Tom Donohue as warning that the Trump administration’s trade war could cause the loss of 2 million jobs, mostly in states which voted for Trump.

Auto concerns

Exacerbating the trade war, Trump also reportedly said he wants to chase German carmakers out of the U.S. entirely, according to report from German magazine Wirtschaftswoche citing unnamed European and U.S. diplomats. It’s not the first time he’s made similar threats against German carmakers, as he’s been angered by his belief that U.S. autos aren’t well sold in Germany.

Early last year, then German deputy chancellor and minister for the economy, Sigmar Gabriel, had told Trump that if U.S. automakers wanted to sell more cars in Germany they should “build better cars.”

The Trump administration last month launched an investigation of whether to impose tariffs as high as 25 percent on all imports of cars on putative “national security” grounds.

U.S. dollar

The U.S. dollar index, which measures the greenback against a basket of currencies, was lower at 93.98 at 6:05 A.M. SGT, after trading as high as 94.94 earlier in the week.

The dollar index is heavily weighted toward the euro, which climbed amid signs that the Italian political turmoil may be subsiding. Investors had feared that another election would be called, which could have turned into a referendum on the euro, but two euro-skeptic parties appear to have managed to form a government.

But the decline could prove to be short-lived.

Data on Thursday showed U.S. consumer spending accelerated, rising a higher-than-expected 0.6 percent last month, the biggest jump since November, when the Christmas shopping season began. Separate data also showed the number of people filing for unemployment benefits dropped more than expected last week, in a sign the U.S. labor market is tightening.

“Consumer spending is accelerating and inflation is holding firm in a tightening labor market, so the Fed is likely to stay on course with those gradual rate hikes this year despite the signs of uncertainty elsewhere in the world from populism and trade protectionism,” Chris Rupkey, chief financial economist at MUFG, said in a note on Thursday. “The Federal Reserve’s policy is still stimulative with interest rates below normal levels, so a strengthening economy argues for more rate hikes this year.”

Oil prices

Nymex WTI crude futures for July were flat at US$67.04 a barrel at 8:11 A.M. SGT, while ICE Brent futures were up 0.12 percent at US$77.59 at 2:29 A.M. SGT, according to Bloomberg data.

That was despite the U.S. Energy Information Administration data showing that U.S. commercial crude oil inventories on May 25 fell by 3.6 million barrels from the previous week.

“Despite the EIA reporting a larger than expected inventory draw, there doesn’t appear to be a great deal of interest in pursuing the market higher given that no one wants to be caught long and wrong if OPEC does boost output significantly,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Friday.

“There is nothing more unappealing than trading oil amid OPEC rumours and innuendos which has sidelined a lot of spot oil traders,” he said.

This article was originally published on Friday, 1 June 2018 at 8:35 A.M. SGT; it has since been updated.