Singapore market trends Thursday: ECB hints on QE to boost sentiment

Euro coinsPhoto by Leslie Shaffer

Singapore’s shares may open higher on Thursday amid positive cues from Wall Street overnight and from regional markets after the European Central Bank hinted it was on the cusp of normalizing its policy.

Singapore stocks to watch Thursday: Genting Singapore, Ezion, Del Monte Pacific

The Dow Jones Industrial Average climbed 1.40 percent on Wednesday, the S&P 500 rose 0.86 percent and the Nasdaq gained 0.67 percent. Futures were flat in early trade on Thursday.

Japan’s Nikkei 225 opened higher, rising 0.53 percent by 8:01 A.M. SGT.

News that the ECB would likely use its meeting next week to discuss winding down its quantitative easing program, which has tamped down yields through the purchases of bonds, supported market sentiment.

That helped to push up U.S. Treasury yields, with the 10-year U.S. Treasury bond yielding 2.98 percent at 8:28 A.M. SGT, according to Bloomberg data, compared with around 2.88 percent a day earlier.

“As investors remain jittery over trade and tariffs, higher global bond yields on the hawkish ECB inference are driving financials higher,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Thursday. “While interest rates are usually a negative for equity markets, investors are viewing higher interest rates in a favourable light, reflective of surging economic growth, not as a buffer against inflation.”

G-6 plus one?

The gains came despite some tension over the upcoming G-7 meeting, where the U.S. trade war will likely make for testy relations, with some describing the meeting as the G-6 plus one. U.S. President Trump’s economic adviser and former CNBC commentator Larry Kudlow, however, reportedly said the meeting would be more like “a family quarrel.”

Raghuram Rajan, who was India’s central bank chief from 2013 to 2016, said this week that markets often don’t price in the biggest of risks.

Currencies

The dollar index, which measures the buck against a basket of currencies, was at 93.58 at 7:59 A.M. SGT. That compared with levels as high as 94.29 earlier this week.

The euro was fetching US$1.1785 at 8:11 A.M. SGT, remaining well above May levels of as low as US$1.1541 as concerns over Italy’s political turmoil receded somewhat.

Oil

Nymex WTI crude oil futures for July were up 0.68 percent at US$65.17 at 7:53 A.M. SGT, while ICE Brent crude futures for August were down 0.03 percent at US$75.36 at 5:59 A.M. SGT, according to Bloomberg data.

Innes noted that WTI prices had dipped below US$64 in the overnight session.

“I suspect there are two exogenous factors in play that are keeping oil prices bid on dips. One, China consumption remains exceptionally high, and the markets could be underestimating this demand component in the global supply and demand equation,” Innes said. “Two, traders realize that price at the time of the Vienna meeting will have as much to do with OPEC supply rebalancing act as global supplies themselves.”

 

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