Singapore market trends Wednesday: Trade tensions continue, Wall Street falls, SGD firms

Singapore two-dollar bills

Singapore shares may struggle on Wednesday, amid continued tensions on the global trade front and as the U.S. heads into holiday mode.

“Looking to the second half of 2018, we expect economic fundamentals to remain positive,” which should be “supportive” for stocks, UBS said in a note on Monday.

“But we should prepare for volatility to continue. A trade war, sharply higher interest rates, or a China credit crunch triggered by deleveraging all are risks that could drive volatility, even we don’t expect any to materialize,” UBS added.

U.S. shares ended lower, but the markets’ early close ahead of the July 4 Independence Day holiday likely impacted volumes. The Dow Jones Industrial Average shed 0.54 percent, the S&P 500 lost 0.49 percent and the Nasdaq was down 0.86 percent.

Facebook shares fell more than 2 percent after the Washington Post reported, citing people familiar with the official inquiries, that the federal investigations into the social media company sharing data with political consultancy Cambridge Analytica have broadened to multiple agencies, including securities regulators.

The Straits Times Index ended Tuesday down just 0.09 percent at 3235.90; index futures for July were at 3220 on Tuesday, while futures for August were at 3188.

Japan’s Nikkei 225 index was down 0.53 percent in early trade.

Trade war

U.S. President Trump on Monday threatened the WTO, saying “we’ll be doing something,” and complained the organization “has treated the U.S. very, very badly.”

That was after Axios reported exclusively that the Trump administration had a draft bill, ordered by Trump, to abandon WTO rules. The bill was titled the “United States Fair and Reciprocal Tariff Act,” or FART, the report said.

China is pressuring the European Union for a strong joint statement against the Trump administration’s trade protectionism at a Sino-European summit in Beijing later this month and to tie up for a joint action against the U.S. at the WTO, Reuters reported, citing European officials. So far, the EU has rejected the action, even though China has offered to sweeten the pot with the prospect of opening its market a bit further to European products, the report said.

Currencies

The dollar index, which measures the greenback against a basket of currencies, was at 94.59 at 6:05 A.M. SGT, down from levels over 95 earlier in the week amid holiday shortened trading in the U.S.

But the charts are tipping the dollar index to trend higher in the short term, Wells Fargo Investment Institute’s technical analysis said in a note on Monday. But it added that the charts show it now faces resistance, first at the recent high of 94.94, followed by the psychologically important 100 level.

It tipped support at the 50-day moving average at 93.44, followed by the 200-day moving average at 92.19.

The U.S. 10-year Treasury bond was at 2.831 percent at 7:59 A.M. SGT, off levels as high as 2.888 percent on Tuesday. Bond yields move inversely to prices; fund flows into Treasurys suggest a risk-off trend.

The dollar/yen was at 110.371 at 8:06 A.M. SGT after trading as high as 111.135 overnight, according to DZHI data. The slight strengthening of the safe-haven yen could suggest a risk-off move.

The euro/dollar was at 1.1661 at 8:08 A.M. SGT, after trading as high as 1.1673 overnight, but off its overnight low of 1.1619, according to DZHI data.

Singapore dollar

The Singapore dollar appeared set to trade a tad stronger on Wednesday; the dollar/sing was at 1.3648 at 8:10 A.M. SGT, after trading as high as 1.3692 on Tuesday, according to DZHI data.

UBS said in a note last month that it favored “active exposure” to the Singapore dollar, noting that it maintained a long-Singapore dollar, short U.S. dollar position in its Asia tactical asset allocation strategy. Its six-month dollar/sing forecast was for 1.28.

Oil

Nymex WTI crude oil futures for August were up 0.66 percent at US$74.63 a barrel at 7:44 A.M.. SGT, while ICE Brent crude oil futures for September were up 0.60 percent at US$77.76, according to Bloomberg data.

“On the back of the force majeure in Libya and the supply outages in Canada, the markets are staggering tight over the short run, and despite suggestions of more supplies coming to market, traders continue to buy dips as increased barrels may only act to prevent a more rapid increase in prices given the global economies  insatiable demand for oil,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Monday.

World Cup

Upset surprises continued in the World Cup. England topped Colombia after a 1-1 game, scoring 4-3 in penalty kicks, snapping the Brits’ usually abysmal luck with them.

Sweden also knocked out Switzerland 1-0.

That ended the round of 16, with the quarter finals set to begin on Friday with Uruguay going head-to-head with France. Saturday, its favorite Brazil against Belgium and Sweden playing England. Dark horse Russia will be playing Croatia on Sunday.

 

 

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