Singapore market trends Thursday: Trade war jitters on the rise, oil climbs

Knife display at Daiso in SingaporeKnife display at Daiso in Singapore

Singapore shares will open trade on Thursday with negative leads from Wall Street and regional markets amid contradictory statements from the U.S. on how it will wage its trade war on China.

“Uncertainty and confusion around trade war are slowly but surely leading the markets down the road to financial horror,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Thursday. “On the U.S. markets, stocks closed lower as confusion reigns over the U.S. administration trade policy.”

The Dow Jones Industrial Average fell 0.68 percent on Wednesday, the S&P 500 shed 0.86 percent and the Nasdaq lost 1.54 percent. Futures for the three indexes were nearly flat in early trade.

Japan’s Nikkei 225 index opened lower, falling 0.85 percent in early trade.

The Straits Times Index ended Wednesday down 0.8 percent at 3254.77. July futures for the index were at 3245 on Wednesday, while August future were at 3213.

Shares had initially rising on Wednesday after the Trump administration’s restrictions on Chinese investment in U.S. technology companies appeared set to come out less harsh than originally hyped. However, U.S. President Trump indicated on Wednesday it would be aimed at more countries than just China. The official, detailed announcement was due on Friday.

But that rally was cut off at the knees after White House economic adviser and former CNBC commentator, Larry Kudlow, said in an interview on Fox Business News that Trump had no plans to ease his stance on China trade relations, saying the U.S. would be “comprehensive” about protecting its “technological family jewels.”

Trade war

“If the administration doesn’t understand what the president is trying to achieve from his trade policy, that is hardly a sign of confidence for investors,” OANDA’s Innes said. “For traders hoping to take a summer vacation, there is no rest for the weary.”

Other analysts were even more stark in their criticism.

Scotiabank remained harshly critical of U.S. protectionism, saying on Wednesday that aggressive talk from the U.S. Trade Representative may be fanning some mild risk-off bias in world markets.

It pointed to this statement from USTR Robert Lighthizer: “These retaliatory tariffs underscore the complete hypocrisy that governs so much of the global trading system. Their recent tariffs prove that they simply ignore WTO rules whenever doing so is convenient.”

Scotiabank noted that the U.S. has been labeling allies as national security threats to justify protectionist measures, then calling them names when they strike back.

“Clearly, U.S. trade policy is suffering a very deep credibility problem,” it said.

For traders worried about higher interest rates, Trump’s trade war may have a silver lining: Atlanta Federal Reserve President Raphael Bostic said on Wednesday that increased trade tensions may push him to oppose a fourth rate hike this year, Reuters reported.

Currencies

The U.S. dollar index was at 95.27 at 8:26 A.M. SGT, climbing from as low as 94.56 on Wednesday.

The 10-year U.S. Treasury yield was at 2.83 percent at 8:42 A.M. SGT, after trading as high as 2.899 percent earlier in the week. Bond prices  move inversely to yields.

The dollar/yen was at 110.05 at 8:38 A.M. SGT after trading as low as 109.71 overnight.

The euro/dollar was at 1.1564 at 8:40 A.M. SGT, after trading as high as 1.1668 overnight.

The dollar/sing was at 1.3672 at 8:39 A.M. SGT, after trading as low as 1.3622 overnight.

Oil

Oil prices climbed overnight amid reports of production disruptions in Canada, adding to concerns that Iran’s output will soon be removed from global markets even as Venezuela’s supply contribution is declining and Libya faces political uncertainty.

Nymex WTI crude oil futures for August were down 0.45 percent at US$72.43 a barrel at 7:47 A.M. SGT, after spiking from around US$70.66 in the previous session, while ICE Brent Crude futures for August were up 1.72 percent at US$77.62 at 5:57 A.M. SGT, according to Bloomberg data.

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