Singapore market trends Friday: Shares may gain as dollar weakens, US-China tensions may ease

U.S. one-dollar and five-dollar currency notes; taken September 2018.U.S. one-dollar and five-dollar currency notes; taken September 2018.

Singapore’s shares may follow positive leads from regional markets on Friday and from Wall Street on Thursday amid some expectations that the U.S. may temper its hardline on China and as the U.S. dollar weakened.

Emerging market concerns may also ease after Turkey took steps to tamp down its currency crisis.

“Not surprising, interbank emerging market currency volumes surged as a solidarity rally by proxy ensued, much to the relief of just about everyone quite frankly, as U.S. stocks pushed higher with the technology sector rebounding as participants took a more calming view of the U.S.-China trade dispute,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Friday.

“Emerging market assets rallied on the weaker U.S. dollar which supported a very bubbly risk environment,” he added.

Trade war jitters continue to simmer, with U.S. President Trump taking to Twitter to both confirm reports that the U.S. plans fresh trade talks with China and to undermine them by claiming the U.S. has no real interest and sees no real benefit from a deal. To be sure, Trump has a history of making bombastic threats followed by capitulation during negotiations, a process documented in his ghost-written books.

 

Indexes

Japan’s Nikkei 225 index was up 0.68 percent in early trade on Friday, likely boosted by a weaker yen against the dollar, while South Korea’s Kospi tacked on 1.35 percent.

The Straits Times Index ended Thursday up 0.23 percent at 3131.77; September futures for the index were at 3131 on Thursday, while October futures were at 3136.

Read more: Singapore stocks to watch Friday: ST Engineering, Keppel, Venture, CapitaLand, China Jinjiang

Hong Kong’s Hang Seng Index was up 2.54 percent at 27,014.49 at Thursday’s close, while China’s CSI 300 added 1.08 percent to 3236.566.

The Dow Jones Industrial Average gained 0.50 percent at 26,129.43 by Thursday’s close, the Nasdaq Composite tacked on 0.75 percent at 8013.71 and the S&P 500 rose 0.53 percent at 2904.18.

Currencies

The U.S. dollar index was at 94.55 at 7:56 A.M. SGT, after touching levels as high as 94.95 before dropping as low as 94.44 on Thursday, according to ICE futures data.

The 10-year U.S. Treasury note yield was at 2.974 percent at 8:08 A.M. SGT after dropping as low as 2.943 percent on Thursday from as high as 2.981 percent during that session, according to Tullett Prebon data.

Dollar drops

The dollar took a hit after U.S. inflation data came in lower than expected: for August, the consumer price index (CPI) rose just 0.2 percent, in line with July’s level. That followed a report on Wednesday that producer prices had fallen in August for the first monthly drop in around 18 months.

“This is not what an economy at full employment and ten consecutive years of growth is supposed to look like,” Chris Rupkey, chief financial economist at MUFG, said in a note on Thursday U.S. time.

“Each inflation report that comes up short means you lose a Fed official who is dead set on moving interest rates above normal. It is going to be a real battle at the Fed once rates start to rise to 2.5 percent. This economy isn’t setting off the dangerous sparks of inflation so there is less urgency to put the interest-rate brakes on the economy,” he added. “A rate hike later this month is a slam dunk, but after that, the path ahead for interest rates grows foggy.”

Euro rallies

The euro/dollar was at 1.1688 at 8:10 A.M. SGT after trading in a 1.1607 to 1.1701 range on Thursday, according to DZHI data.

The rise in the euro followed the European Central Bank decision on Thursday, in which the statement remained largely unchanged, with plans to end bond buying this year, although a plan to cut the monthly quantum in half to 15 billion euros from October was firmed up.

“The euro/dollar rallied because low inflation has become less of a concern. According to [ECB chief] Mario Draghi, domestic cost pressures are strengthening and inflation should pick up towards the end of the year and rise gradually in the medium term,” Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management, said in a note late Thursday U.S. time.

“Considering that euro was trading strongly ahead of the rate decision, it didn’t take much for the currency pair to hit 1.17 and now that it has many traders are wondering if they should fade or follow the move,” she said.

The dollar/yen was at 112.055 at 8:11 A.M. SGT after trading in a 111.14 to 112 range on Thursday, according to DZHI data.

The dollar/yuan ended Thursday at 6.8406 after trading in a 6.8241 to 6.8500 range on Thursday, which was off a high of 6.8792 touched on Wednesday, according to DZHI data.

The Singapore dollar steadied after strengthening on Thursday; the dollar/Sing was at 1.3705 at 8:13 A.M. SGT, after trading in a 1.3671 to 1.3729 range on Thursday, which was off a high of 1.3815 touched on Monday, according to DZHI data.

Turkey’s lira climbs

The Turkish lira regained some lost ground, with the dollar/lira at 6.1347 at 8:33 A.M. SGT, after trading in a 5.9879 to 6.5514 range on Thursday, coming down from a high of 7.2149 touched mid-August, according to DZHI data, amid the country’s currency crisis, which sparked contagion among some other emerging market currencies.

Turkey’s central bank on Thursday hiked interest rates by 625 basis points to 24 percent to stem the currency’s slide.

Oil

Nymex WTI crude oil futures for October were up 0.39 percent at US$68.86 a barrel at 7:48 A.M. SGT, while ICE Brent crude oil futures for November were down 1.96 percent at US$78.18 a barrel at 5:59 A.M. SGT, according to Bloomberg data.

Read more: Crude oil may rise in Asia on rebound and after IEA warns of rising demand

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