Singapore’s shares will start trade on Tuesday with positive leads from Wall Street and Japan’s shares, as positive economic data helped to soothe fears over the U.S. trade war.
“Solid global growth readings including this morning’s German exports, Friday’s nonfarm payrolls and Canadian jobs report are driving a risk-on bias across global asset classes,” Scotiabank said in a note on Monday. “The U.S. dollar is being dumped and so are sovereign bonds in favour of equity market gains and slightly firmer oil prices.”
Japan’s Nikkei 225 index opened higher, rising 1.06 percent in early trade.
The Dow Jones Industrial Average rose 1.31 percent on Monday, the S&P 500 added 0.88 percent and the Nasdaq gained 0.88 percent. Futures for the three indexes were higher in early trade on Tuesday.
The Straits Times Index ended Monday up 1.16 percent at 3228.82; July futures for the index were at 3216 on Monday, while August futures were at 3184.
China-related shares have begun to retrace some of their recent rout. China’s Shanghai Composite ended Monday up 2.47 percent at 2815.11, while Hong Kong’s Hang Seng Index tacked on 1.32 percent to 28,688.50 by the close on Monday.
Concerns over the U.S. trade war are still preying on the market, however, particularly in Asia.
“While the estimated impact of the trade tensions on the large economies of China and the U.S. are likely to be manageable, the Asian region could be more vulnerable due to their higher export dependence,” UOB said in a note on Monday. “Even if other Asian exports are not targeted directly by the tariffs, there will be a significant hit from a slowdown in global demand and spillovers on the industries due to the complexity of global supply chain.”
The British pound was battered overnight after Prime Minister Theresa May lost a second cabinet member, Foreign Secretary Boris Johnson, who resigned shortly after Brexit minister David Davis. That could lead to a power challenge against May.
“Long Sterling is arguably the G-10 most crowded trade so any Brexit hiccup will likely trigger an outsized move as weaker near-term stops get triggered,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Monday.
Others pointed to how the political turmoil may affect the interest rate outlook.
“With political risk at home likely to weigh on expectations over higher U.K. interest rates this year, the pound may be poised for further punishment,” Hussein Sayed, chief market strategist at FXTM, said in a note on Monday.
The pound/dollar was at 1.3251 at 8:28 A.M. SGT, falling from as high as 1.3363 overnight, but off the overnight low of 1.3189, according to DZHI data.
The euro/pound was at 0.8872 at 8:29 A.M. SGT, rising from as low as 0.8809 overnight, but off the overnight high of 0.8902, according to DZHI data.
The dollar index, which measures the greenback against a basket of currencies, was at 94.05 at 8:05 A.M. SGT, after climbing as high as 94.18 overnight, but well off the trough of as low as 93.73 touched overnight.
Analysts expect the dollar to weaken ahead, with the dollar index, or DXY, already off levels over 95 touched early in July.
“The takeaway from last week is that the dollar is going through its most difficult patch since January as the odds of four Fed hikes grind to a halt around 42 percent and China draws a line in the sand on the yuan,” Societe Generale said in a note on Monday. “The DXY has dropped three weeks on the trot now and could be due for another decline of around 1 percent if we take the next support level as 93.19, the low of 14 June (ECB meeting).”
The 10-year U.S. Treasury yield was at 2.862 percent at 8:16 A.M. SGT after trading as low as 2.841 percent overnight. Bond yields move inversely to prices.
The dollar/yen was at 110.975 at 8:20 A.M. SGT, with the Japanese currency weakening from its 110.28 to 110.903 range on Monday, according to DZHI data.
The euro/dollar was at 1.1760 at 8:21 A.M. SGT, after trading in a 1.1731 to 1.1791 range on Monday, according to DZHI data.
The dollar/yuan was at 6.6122 at Monday’s close, with the Chinese currency continuing to regain lost ground after the pair climbed as high as 6.7167 last week amid a rout in Chinese equities.
The Singapore dollar continued to strengthen, with the dollar/sing at 1.3545 at 8:22 A.M. SGT, after trading in a 1.3523 to 1.3583 range on Monday.
Nymex WTI crude oil futures for August rose 0.18 percent to US$73.98 a barrel by 7:37 A.M. SGT, while ICE Brent crude oil futures for September were up 1.24 percent at US$78.07 at 6:00 A.M. SGT, according to Bloomberg data.
Germany’s Chancellor Angela Merkel said on Monday that Germany was still committed to the Iran nuclear deal, but companies must decide individually if they wanted to invest there, Reuters reported; U.S. President Trump has violated the pact and said the U.S. will impose sanctions on companies that do business with Iran.
Libya’s oil output has been halved to around 527,000 barrels a day and is still dropping amid clashes in the country which have closed the major ports, Bloomberg reported, citing Mustafa Sanalla, chairman of the National Oil Corp.
Traders may have gotten a good night’s sleep overnight Monday, but that’s likely only so they’re well-rested in preparation for the next World Cup game, which will tee off at 2:00 A.M. SGT on Wednesday.
The semi-finals will begin with France against Belgium.
Then expect another sleepless night to follow, in a match between a pair of dark horses, Croatia and England, in the wee hours (Singapore time) on Thursday.