Singapore market trends Friday: North Korea, G-7, trade war tensions on simmer

South Korea Kimchi package

Singapore shares may end the week on the back foot after a technology selloff on Wall Street on Friday and amid signs off risk-off moves in the U.S. as geopolitical fears remain on simmer.

The Dow Jones Industrial Average ended Thursday up 0.38 percent, while the S&P 500 slipped 0.7 percent and the Nasdaq shed 0.70 percent. Futures for the three indexes had turned nose down.

“Entering weeks’ end, investors are taking another peek at the calendar and thinking that perhaps booking some profit is prudent in case politics gets messy over the next week or so,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Friday.

The Straits Times Index ended Thursday up 0.15 percent at 3473.08; according to SGX data, futures for the index were at 3475 at the close on Thursday.

DBS said in a note earlier this week that after May’s selloff, it didn’t see much downside for the STI; it tipped support at or slightly below 3415.

Risk-off moves

U.S. 10-year Treasury yields touched a four-day low of 2.884 percent overnight after touching a two-week high of 2.994 percent earlier in the session, according to Reuters data.

Some traders attributed the risk-off move to increased tensions ahead of the G-7 summit in Canada this weekend, as the U.S. trade war has angered its allies. According to a Reuters report, France’s President Emmanuel Macron said that the U.S. would likely be isolated at the summit, warning “no leader is forever,” and adding “we don’t mind being six, if needs be.” That suggested an unusual level of drama for a usually boring event.

“There’s a good reason for investors to be chary as this meeting is unlikely to follow an orderly arrangement of discussion. Even more so as Canada and Mexico have retaliated against a range of U.S. exports and the EU has promised to do so as well,” Innes said.

North Korea jitters

Additionally, Singapore may be wary in the lead up to the U.S.-North Korea summit to be held in the city-state next week, with the sounds of fighter jets overhead becoming a frequent occurrence and other security measures proceeding around the city-state.

U.S. President Trump’s trademark inconsistency was on full display on Thursday, as he issued a combination of threats to quit the summit if things didn’t go his way, an offer to invite North Korean leader Kim Jong Un to the White House if things go well — an offer usually made to allies — and offered to “normalize” ties with the pariah nation, which would suggest an acceptance of Kim’s regime.

“Ultimatums and revelation around the upcoming Trump-Kim summit are spooking investors. The president reinforced his denuclearisation ultimatum to North Korea and is prepared to walk if 100 percent compliance with his rigid demands is not agreed. My quants are busy entering the phrase ‘maximum pressure’ into the news reader algorithm as Trump promises to use these words if the meeting goes bad,” Innes said.

Currencies

The dollar index, which measures the buck against a basket of currencies, was at 93.44 at 6:05 A.M. SGT, up from levels as low as 93.22 overnight. That compared with levels as high as 94.29 earlier this week.

The euro was fetching US$1.1795 at 7:35 A.M. SGT, off levels as high as US$1.1837 overnight, but well above May levels of as low as US$1.1541 as concerns over Italy’s political turmoil have receded somewhat. The common currency likely also continued to find strength from the European Central Bank’s hints that removing its quantitative easing program was up for discussion at the upcoming meeting.

The Singapore dollar lost ground against the U.S. dollar. The greenback was fetching S$1.3341 at 8:23 A.M. SGT, compared with levels as low as S$1.3304 on Thursday. But the Sing was still stronger than levels just under S$1.34 a week earlier.

“The combination of encouraging domestic economic data throughout the week and dollar weakness has boosted buying sentiment towards the Singapore dollar,” Lukman Otunuga, research analyst at FXTM, said in a note on Friday.

Oil prices

Nymex WTI crude oil futures for July were up 0.05 percent at US$65.98 at 7:16 A.M. SGT, while ICE Brent crude oil futures for August were up 2.60 percent at US$77.32 at 5:59 A.M. SGT, according to Bloomberg data.

“While oil prices may have seen their near-term peaks, it’s highly unlikely prices will collapse, but rather OPEC, through gradual supply increases, will guide prices low enough so U.S. consumers will not feel the pinch, yet remain high enough to benefit the industry going forward,” Innes said.

 

Get Shenton Wire headlines in your inbox

* indicates required