Singapore’s shares may stumble on Wednesday as traders will face continued jitters over the U.S. trade war, even as emerging markets continue to face fears of contagion from selloffs across Argentina, Turkey and South Africa.
“Markets continue to roil as the September 6 deadline for public comments on the next slice of Section 301 of China tariffs approaches. But it’s been very mixed bag across global equity markets,” Stephen Innes, head of Asia-Pacific trading at OANDA, said in a note on Wednesday. “Bull markets never run forever, but the U.S. markets resilience in the face of a possible escalation of trade war is mighty impressive.”
Traders will also be awaiting developments in the NAFTA talks between the U.S. and Canada; the Trump administration has touted reaching a deal with Mexico to update the trade pact, but Canada has yet to sign on and Trump issued a belligerent tweet over the weekend falsely claiming it wasn’t necessary to keep Canada in the deal.
“NAFTA negotiations recommence [Wednesday] and it’s President Trump versus the world it would seem. The same advice still holds in that his bombastic rhetoric should be largely ignored and there are important checks against the executive branch’s overstated self indulgences on trade,” Scotiabank said in a note on Tuesday. “Trump can’t unilaterally terminate NAFTA; he can deliver a six-month letter of intent that Congress then has to act upon and that would mean the next Congress that the GOP may no longer control.”
There is no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out. Congress should not interfere w/ these negotiations or I will simply terminate NAFTA entirely & we will be far better off…
— Donald J. Trump (@realDonaldTrump) September 1, 2018
Emerging markets have also faced headwinds from a stronger dollar and rising interest rates in the U.S., as well as idiosyncratic issues, such as a budget crisis in Argentina.
Wall Street stumbles
The Dow Jones Industrial Average ended Tuesday down 0.05 percent at 25,952.48, the Nasdaq shed 0.23 percent to 8091.246 and the S&P 500 lost 0.17 percent to 2896.72. Futures for the three indexes were a tad lower early Wednesday.
The Straits Times Index ended Tuesday up 0.1 percent at 3210.51; September futures for the index were at 3210 on Tuesday, while October futures were at 3214.
Hong Kong’s Hang Seng Index ended Tuesday up 0.94 percent at 27,973.34, while China’s CSI 300 rose 1.27 percent to 3363.898.
The U.S. dollar index, which measures the greenback against a basket of currencies, was at 95.41 at 7:46 A.M. SGT, after rising as high as 95.71 on Tuesday from levels as low as 94.57 on Friday, according to ICE futures data.
“The greenback extended its gains against all of the majors thanks in part to stronger-than-expected manufacturing activity. Despite trade tensions and U.S. dollar strength, the manufacturing sector is performing well with activity expanding at its fastest pace in 14 years. New orders surged, leading to increased production and employment,” Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management, said in a note late Tuesday U.S. time.
“This could be a good week for the U.S. dollar especially as the technical picture coincides with the fundamental one,” she added.
Treasury yield rises
The 10-year U.S. Treasury note yield was at 2.902 percent at 7:56 A.M. SGT, up from levels as low as 2.854 percent on Tuesday, according to Tullett Prebon data.
The euro/dollar was at 1.1587 at 8:01 A.M. SGT, after trading in a 1.1529 to 1.1618 range on Tuesday, according to DZHI data.
The dollar/yen was at 111.406 at 8:02 A.M. SGT, after trading in a 110.87 to 111.533 range on Tuesday, according to DZHI data.
The dollar/yuan ended Tuesday at 6.8426, after trading in a 6.8064 to 6.8442 range, according to DZHI data.
The Singapore dollar regained some ground it lost in Tuesday’s trade; the dollar/Sing was at 1.3753 at 8:04 A.M. SGT, after the pair traded as high as 1.3782 on Tuesday, but it was still above Tuesday’s low of 1.3710, according to DZHI data.
Nymex WTI crude oil futures for October were down 0.72 percent at US$69.37 a barrel at 7:36 A.M. SGT, while ICE Brent crude oil futures for November edged up 0.03 percent to US$78.17 a barrel by 5:59 A.M. SGT, according to Bloomberg data.