Singapore market trends Thursday: Nasdaq rallies, OPEC eyed, US trade war simmers

Singapore one dollar bill

Singapore’s shares may shrug off U.S. trade war fears on Thursday after a mild lead from Wall Street overnight.

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“Despite the huge question mark over global trade, Wall Street quickly returns focus to the U.S. economy and to which there is no denying it is doing exceptionally well,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Thursday.

The Dow Jones Industrial Average slipped 0.17 percent on Wednesday, the S&P 500 added 0.17 percent and the Nasdaq climbed 0.72 percent to a record close, boosted by surges in shares of Netflix and Facebook. Futures for the three indexes had their noses in the green.

Japan’s Nikkei 225 index opened down 0.09 percent on Thursday.

The Straits Times Index ended Wednesday up 0.44 percent at 3315.90; July futures for the index were at 3308 on Wednesday.

The trade war fears may have retreated to the background, but the pot is still simmering.

Global central bankers have expressed fears that the trade war would begin to impact global economic growth, Bloomberg reported.

The European Union was also set to begin retaliatory tariffs on imports of U.S. goods into the bloc on Friday.

Currencies

The dollar index, which measures the greenback against a basket of currencies, was at 95.12 at 6:05 A.M. SGT, remaining broadly stable overnight.

The 10-year U.S. Treasury yield was at 2.939 percent at 7:53 A.M. SGT, after trading as low as 2.857 percent earlier in the week. Bond prices move inversely to yields.

The euro was fetching US$1.1577 at 7:51 A.M. SGT, largely flat overnight, but some analysts were expecting the common currency would loss ground ahead.

“I struggle to see how we avoid a break below the psychologically important 1.15 level in the coming days,” Kit Juckes, global head of foreign-exchange strategy at Societe Generale, said in a note on Wednesday, adding he was “not terribly optimistic” that support at 1.1450 would hold either.

He said the euro/dollar had been “trying to recouple” with relative interest rates recently, with any fresh U.S. Treasury selloff likely to embolden dollar bulls. Bond prices move inversely to yields.

“The overall tone from the ECB in the last week has been dovish enough to get the market odds of a first-half 2019 rate hike down to 30 percent,” he added.

Higher yields in the U.S. than in Europe would make investing in European assets less attractive relatively than the U.S.

Singapore dollar

The dollar/yen was at 110.333 at 7:00 A.M. SGT, compared with a low of 109.82 overnight.

The Singapore dollar remained on a downtrend, with the U.S. dollar fetching S$1.3584 at 7:57 A.M. SGT, compared with a low for the greenback of S$1.3546 overnight.

“Asia ex-Japan currencies are giving back their gains from last year’s Global Reflation Trade. Only two currencies – the Chinese yuan and the Malaysian ringgit – have kept their year-to-date appreciation,” DBS said in a note on Wednesday. “China and Malaysia are large trading partners of Singapore. Further weakness in their currencies would keep the Sing dollar weak above 1.35. Our end-year target for USD/SGD remains at 1.38.”

Oil

Nymex WTI crude oil futures for August were down 0.05 percent at US$65.68 a barrel at 8:06 A.M. SGT, while ICE Brent Crude futures for August were off 0.29 percent at US$74.52.

OPEC’s meeting on Friday will be closely watched for whether the organization agrees to boost production, especially amid concerns about the loss of some output from Venezuela and Iran.

Some analysts have said, however, that even output increases won’t necessarily affect the supply-demand situation enough to cool oil prices, with Nomura and Goldman Sachs both taking relatively bullish stances.

The meeting’s politics were complicated by some ire after U.S. President Trump recently lambasted the organization on Twitter with complaints that oil prices were too high. In televised remarks, Iran’s oil minister laid the oil price climb at the U.S.’s door, saying it was due to U.S. sanctions on Iran and Venezuela.

“There is a growing sense of uncertainty mounting ahead of Friday’s OPEC meeting, with markets now re-evaluating if an output increase could still be on the table,” Lukman Otunuga, research analyst at FXTM, said in a note on Monday.

“While Saudi Arabia and Russia are pushing OPEC and its allies to raise production, other members including Iran, Iraq, and Venezuela have opposed such a move.  With Iran already stating that it was likely to reject any agreement that raised output, this could be a fractious meeting between oil producers in Vienna,” he said.

World Cup

On Wednesday, Russia beat Egypt, marking the North African country’s second loss at the World Cup. Portugal beat Morocco and Spain topped Iran. Uruguay also had a victory over Saudi Arabia.

Later on Thursday, Denmark will play Australia and France will go head-to-head with Peru.

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