Singapore market trends Wednesday: Turkey fears recede, but euro weakness eyed

Euro coinsPhoto by Leslie Shaffer

Singapore shares may trade with more equanimity on Wednesday as global fears over Turkey’s currency crisis begin to recede after the sharp recent selloff, although concerns over the euro persisted.

Read more: Singapore stocks to watch Wednesday: ThaiBev, Yongnam, Old Chang Kee, Noble, Yanlord

“The scale of the falls seems disproportionate given the size of Turkey’s economy. At market exchange rates, the country’s GDP was US$900 billion last year, which is equivalent to just 1 percent of global GDP. Even a sharp recession in Turkey, which now looks increasingly unavoidable, should only have a small impact on Asia,” Capital Economics said in a note this week.

“For most countries, however, the sharp falls in financial markets seem like an overreaction given their limited trade and financial ties to Turkey,” Capital Economics added.

In the U.S. on Tuesday, the Dow Jones Industrial Average rose 0.45 percent to 25,299.92, the Nasdaq increased 0.66 percent to 7870.895 and the S&P 500 index added 0.64 percent to 2839.96. Early on Wednesday, futures for the three indexes were just slightly in the green.

On Tuesday, the Straits Times Index ended down just 0.076 percent at 3242.87; on Tuesday, August futures for the index were at 3230, while September futures were at 3232.

Japan’s Nikkei 225 index was down 0.18 percent in early trade.

Currencies

The dollar/Turkish lira was at 6.3746 at 8:38 A.M. SGT, well off the high of 7.2149 touched earlier in the week.

The U.S. dollar index was at 96.69 at 8:16 A.M. SGT, according to ICE futures data, slightly off levels as high as 96.76 touched overnight, but still hovering around one year highs.

The 10-year U.S. Treasury note yield was at 2.901 percent at 8:26 A.M. SGT, up from levels as low as 2.876 percent overnight, in a sign that risk-off plays may be retreating. Bond yields move inversely to prices.

Euro declines

The euro/dollar was at 1.1342 at 8:31 A.M. SGT, after trading in a 1.1329 to 1.1429 range on Tuesday, according to DZHI data.

Turkey concerns aren’t the only worries for Europe, Kathy Lien, managing director for foreign-exchange strategy at BK Asset Management, said in a note late on Tuesday U.S. time.

“Investors are worried that Europe is ground zero for the next emerging market crisis. These concerns overshadowed improvements in Eurozone data,” she said, pointing to eurozone second-quarter gross domestic product (GDP) data beating expectations, although only Germany saw growth accelerate.

“Between trade tensions, slower Chinese growth and Turkey’s economic crisis, the outlook for the euro is grim,” she said, adding that if the pair breaks under 1.13, the next support is at 1.12.

The dollar/yen was at 111.311 at 8:32 A.M. SGT, after trading in a 110.56 to 111.315 range overnight, according to DZHI data.

The dollar/yuan ended Tuesday at 6.8818, according to DZHI data.

The U.S. dollar was fetching S$1.3780 at 8:33 A.M. SGT, after trading in a S$1.3715 to S$1.378 range on Tuesday, according to DZHI data.

Oil

Crude oil prices may ease on Wednesday in Asia after the American Petroleum Institute (API) released estimates of weekly U.S. crude and refined product stocks that showed a surprise build in oil, while a stronger dollar also weighed.

Read more: Crude oil seen weaker as API estimates show surprise stocks build