Singapore market trends Thursday: Earnings and trade war fears to vie for attention

Singapore container portSingapore’s container port

Singapore shares were set to open to mixed signals on Thursday, with Japan’s Nikkei 225 trading up despite concerns the U.S. trade war was set to escalate.

“A risk-off global market bias is shifting the tone compared to the first couple of days of the trading week, but the magnitude of the market moves across the asset classes is pretty small especially in the context of equity gains over the past couple of days,” Scotiabank said in a note on Wednesday.

Traders will also be focusing on earnings expectations, with early reports beginning to come in, while at the same time, sleep deprivation may keep some sidelined after the World Cup game in Singapore’s wee hours.

Singapore stocks to watch Thursday: SPH, Yangzijiang, Oxley, PACC Offshore, Sembcorp

Japan’s Nikkei 225 index was up 0.92 percent in early trade.

The Dow Jones Industrial Average ended Wednesday down 0.88 percent, the S&P 500 fell 0.71 percent and the Nasdaq shed 0.55 percent. Futures for the indexes were nearly flat in early trade on Thursday.

The Straits Times Index ended Wednesday down 0.79 percent at 3249.08; July futures for the index were at 3238 on Wednesday, while August futures were at 3206, according to SGX data.

China’s Shanghai Composite ended Wednesday down 1.76 percent at 2777.77, while Hong Kong’s Hang Seng Index fell 1.29 percent to 28,311.69.

Trade war

China warned that it would retaliate if the Trump administration imposes its threatened tariffs on US$200 billion of Chinese products, which were the U.S.’s retaliation for China’s retaliation on the U.S. imposing tariffs on US$34 billion of Chinese goods.

Analysts were particularly concerned by the latest moves, especially as formal talks between China and the U.S. over trade appear non-existent.

“We had expected some response from the Trump administration following China’s retaliatory tariffs last Friday, but the new proposed tariffs are close to the worst-case scenario that we thought possible,” Nomura said in a note on Tuesday, adding China’s response and any sign of formal talks between the U.S. and China would be “critical” to predicting the next steps.

Nomura said that while the fresh U.S. moves were still only a proposal, it was likely “at a minimum” to increase uncertainty for businesses, add headwinds to investment and may weigh on business confidence.

Other analysts also noted that the trade war doesn’t need to escalate to hurt the global economy.

“While the initial $50 billion in tariffs will have limited impact on both economies, adding $200 billion to the list will be damaging. Even without a full-blown trade war, rising uncertainty may be causing economic harm,” Societe Generale said in a note on Wednesday.

The trade war fears have contributed to a growing geopolitical unease globally, particularly after U.S. President Trump’s performance at the NATO summit this week, which reported included a breakfast “tantrum” in which he claimed that Germany was “totally controlled by Russia.” Trump also demanded NATO allies double their military spending; he has previously suggested that the U.S. might exit the storied pact.

“The fact the Trump administration continues to seek greater friendship toward Russia while pushing away allies like Germany raises market concerns about geopolitical risks and whether the U.S. administration is fundamentally shifting global strategic alliances in destabilizing fashion,” Scotiabank said. “America’s allies should definitely be concerned about the personality-led U.S. administration and its economic and political confrontations with historically trusted partners.”

Currencies

The dollar index, which measures the buck against a basket of currencies, was at 94.71 at 7:58 A.M. SGT, spiking higher from levels as low as 94.11 early on Wednesday. Flows into the U.S. dollar can be considered a risk-off move.

“Market expectations over the Federal Reserve raising interest rates at least two more times this year are seen as continuing to heavily support the dollar. With investors potentially rushing to the dollar as a source of safety amid escalating trade tensions, further upside could be witnessed in the near term,” Lukman Otunuga, research analyst at FXTM, said in a note dated Wednesday.

The 10-year U.S. Treasury bond yield was at 2.85 percent at 8:09 A.M. SGT, down from levels as high as 2.860 percent on Wednesday, and levels as high as 2.874 percent earlier in the week. Bond prices move inversely to yields; flows into U.S. Treasurys are often a risk-off move.

The dollar/yen was at 112.062 at 8:14 A.M. SGT, spiking higher from as low as 110.979 on Wednesday, but a tad off Wednesday’s high of 112.176, according to DZHI data.

The euro/dollar was at 1.1675 at 8:14 A.M. SGT, losing ground as high as 1.1760 overnight, according to DZHI data.

The dollar/yuan was at 6.6763 at the close on Wednesday, spiking up from a low of 6.6295 in the session, according to DZHI data. The yuan is facing pressure amid the Trump administration’s trade war.

The Singapore dollar weakened overnight; Singapore is a trade-dependent country. The dollar/Sing was at 1.3643 at 8:17 A.M. SGT, climbing from as low as 1.3569 overnight and off a low of 1.3523 earlier in the week, according to DZHI data.

Oil

Nymex WTI crude oil futures for August were up 0.28 percent at US$70.58 a barrel at 7:47 A.M. SGT, while ICE Brent crude futures for September were down 6.92 percent at US$73.40 at 5:59 A.M. SGT, according to Bloomberg data.

World Cup

The upsets continue at the World Cup, with dark horse Croatia beating England 2 to 1.

That sets up a third-place play off between Belgium and England as an appetizer on Saturday Singapore time, before the main course final between France and Croatia, a pairing which was likely not in anyone’s predictions from the start.