Singapore market trends Wednesday: Trade war, Italy concerns overshadow strong US data

An aerial view of Singapore’s portAn aerial view of Singapore’s port

Singapore’s shares will start trade on Wednesday with middling cues after a tech rally and strong jobs data in the U.S. failed to boost the rest of Wall Street. That was amid a brew of continuing concerns over the U.S. trade war and Italy’s new government.

The city-state may also face worries over potential disruption over the upcoming U.S.-North Korea summit to be held here.

“It is becoming increasingly clear that President Trump’s trade wars remain a major threat to financial markets. With Trump’s unpredictability fostering a growing sense of uncertainty over trade developments, the limited risk appetite could spell more trouble for stock markets,” Lukman Otunga, research analyst at FXTM, said in a note on Wednesday.

The Dow Jones Industrial Average ended down 0.06 percent on Tuesday, while the S&P 500 edged up 0.07 percent and the Nasdaq added 0.41 percent. Futures for the three indexes were just below the flatline early on Wednesday.

The lead from regional markets was less than enthusiastic, with Japan’s Nikkei 225 down 0.16 percent at 8:05 A.M. SGT.

The euro climbed amid easing concerns over Italian political turmoil after the new government passed its first confidence vote, although concerns about that government’s policies may have pushed down U.S. Treasury yields.

Currencies

The common currency was fetching US$1.1727 at 7:59 A.M. SGT, climbing from levels as low as US$1.1654 in the previous session and above May levels of as low as US$1.1541.

The dollar index, which measures the greenback against a basket of currencies heavily weighted toward the euro, fell to 93.88 by 6:05 A.M. SGT, from levels as high as 94.29 overnight.

Charts are tipping the dollar index will trade sideways in the short term, according to Wells Fargo Investment Institute technical analysis. It tipped that after the dollar index’s recent bounce, it will face resistance, first at its recent high of 94.94, followed by the psychologically important 100 level. The charts tipped support at the 200-day moving average of 91.98, followed by the 50-day moving average of 91.72 and the 2009-10 highs around 88-89.

Strong U.S. jobs data

The dollar index’s fall came despite strong economic data in the U.S. suggesting the U.S. Federal Reserve might have reason to become more hawkish.

In the U.S., Job Openings and Labor Turnover Survey, or JOLTS, data showed the number of job openings hit a series high of 6.7 million in April, while the number of hired was little changed at 5.6 million in April.

Chris Rupkey, chief financial economist at MUFG, said in a note on Tuesday that the number of openings topped the 6.065 million unemployed people.

“There is a massive labor shortage out there,” Rupkey said. “You can throw all the capital you want at U.S. corporations and cut their taxes owed to bare bones levels, but this economy has no way to keep growing if there is no one left to hire. Wages may be just months away from heading into the stratosphere where they start producing wage-push inflation the country hasn’t seen since the ’60s and ’70s.”

That was set to push the U.S. Federal Reserve toward a total of four rate hikes this year, he said.

But U.S. Treasury yields still fell, remaining below the psychologically important 3 percent level.

The U.S. 10-year Treasury yield was at 2.88 percent at 8:10 A.M. SGT. That was in part due to concerns that Italy’s new government was poised to go on a spending spree, with promises of tax cuts and welfare spending, Reuters reported. Those fears had previously spurred concerns about Italian banks’ stability as the measures would likely boost Italian bond yields, which move inversely to prices. That would decrease the value of the Italian bonds held by the banks.

Also weighing on Treasury yields as traders moved into risk-off mode was the Trump administration’s trade war. With the U.S. tariffs on steel and aluminum imports from its allies already taking effect, those nations have begun imposing retaliatory tariffs. That could escalate further, with the U.S. already weighing tariffs on autos and auto parts as well as on goods from China.

For its part, China appeared ready to offer concessions, offering to import an additional US$70 billion worth of U.S. products if tariffs aren’t imposed. The Trump administration has focused on the trade deficit as a key measure although economists generally consider this inappropriate and ill-advised.

Oil prices

Nymex WTI crude oil futures for July were up 0.05 percent at US$65.55 a barrel at 7:53 A.M. SGT, while ICE Brent crude oil futures for August were up 0.12 percent at US$75.38 at 5:58 A.M. SGT, according to Bloomberg data. Those levels were well off highs around US$72.90 touched in May for WTI and US$80.50 for Brent.

Traders may be wary of pushing oil prices higher in the wake of a Bloomberg report, citing people familiar with the matter, that the U.S. government has “quietly” asked Saudi Arabia and some other OPEC countries to increase output. It was unusual because the request was specifically for around a million barrels a day, the report said.

This article was originally published at Wednesday 6 June 2018 at 8:34 A.M. SGT; it has since been updated. 

 

Get Shenton Wire headlines in your inbox

* indicates required