Singapore market trends Monday: Shares may take hit as US ratchets up trade war on China

Sculpture by Jimmie Durham, titled ‘Still Life with Spirit and Xitle,’ made of car, volcanic stone and acrylic paint at the Hirshorn museum in Washington, DC. Photo taken July 2018.Sculpture by Jimmie Durham, titled ‘Still Life with Spirit and Xitle,’ made of car, volcanic stone and acrylic paint at the Hirshorn museum in Washington, DC.

Singapore’s shares could fall on Monday amid news over the weekend that U.S. President Trump plans to ratchet up his trade war with China by imposing additional tariffs.

“Markets could stumble out of the blocks in Asia. So far, the U.S. equity market has been relatively insulated to trade war, but further escalation has huge negative implications for global equities,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Monday.

Media reports over the weekend have said the Trump administration was set to impose a 10 percent tariff on US$200 billion of Chinese imports in days. Combined with the tariffs already imposed on US$50 billion of Chinese imports, that would apply penalties to around half of all the U.S. goods imports from China. The mainland was set to swiftly retaliate.

The Wall Street Journal reported on Sunday, U.S. time, that U.S. President Trump believed he had the upper hand in the dispute and was willing to ratchet up pressure, while some Chinese officials were advising restricting the sales of necessary inputs to the U.S. manufacturing chain. China was also reportedly considering declining a U.S. invitation to further trade talks if Trump proceeds with the tariffs.

Trump has also threatened to impose tariffs on all imports from China.

“This good cop bad cop routine continues to undermine [Treasury Secretary Steven] Mnuchin’s efforts as its still not clear if anyone other the Trump himself is commissioned to cut a deal,” Innes said. “All this noise is contributing to a very bearish setup this week,” he added.

Indexes

Japan’s stock market was closed for Respect for the Aged Day. South Korea’s Kospi index opened down 0.32 percent.

The Straits Times Index ended Friday up 0.23 percent at 3131.77; September futures for the index were at 3161 on Friday, while October futures were at 3165.

Hong Kong’s Hang Seng Index was up 2.54 percent at 27,014.49 at Friday’s close, while China’s CSI 300 was up 1.08 percent at 3236.566. Hong Kong’s market was expected to open Monday after the protectorate was struck by Typhoon Mangkhut over the weekend.

The Dow Jones Industrial Average rose 0.50 percent to end at 26,129.43 on Friday, the Nasdaq Composite gained 0.74 percent to 8013.39 and the S&P 500 nudged up 0.03 percent to 2904.98. Futures for the three indexes were lower early on Monday.

Currencies

The U.S. dollar index was at 94.97 at 7:59 A.M. SGT, compared with levels as low as 94.38 on Friday, according to ICE futures data.

The 10-year U.S. Treasury note yield was at 2.997 percent at 5:10 P.M. ET on Friday after touching levels as high as 3.003 percent during the session, topping the 3.0 percent psychological threshold, according to Tullett Prebon data.

“The most significant shift in my view comes from Fed Governor Lael Brainard, who I dare say it, [is] starting to roost with the Hawk suggesting the sitting Federal Reserve Board is a tad more hawkish than markets have priced in,” OANDA’s Innes said. “The market emerging from its summer slumber and may soon realize it’s pricing 2019 rate hike risk far too pessimistically if the strong run of U.S. economic data continues.”

Brainard had indicated the Fed’s hiking cycle could continue for a couple years.

Euro

The euro/dollar was at 1.1627 at 8:14 A.M. SGT after trading in 1.1619 to 1.1722 range on Friday, according to DZHI data.

“Trade war does throw some doubt into the euro/dollar higher view for no other reason we may see U.S. dollar demand on haven appeal,” Innes said.

The dollar/yen was at 111.998 at 8:15 A.M. SGT after trading in a 111.73 to 112.169 range on Friday, according to DZHI data.

The dollar/yuan ended Friday at 6.8672 after trading in a 6.8406 to 6.8673 range on Friday, according to DZHI data, which also showed it dipped as low as 6.8241 during the week.

The Singapore dollar weakened, with the dollar/Sing at 1.3743 at 8:17 A.M. SGT, after trading in a 1.3669 to 1.3744 range on Friday, according to DZHI data.

Oil

Nymex WTI crude oil futures for October were down 0.29 percent at US$68.79 a barrel at 7:47 A.M. SGT, while ICE Brent crude futures for November were off 0.15 percent at US$77.97 at 7:38 A.M. SGT, according to Bloomberg data.

Read more: Crude expected to be weaker in Asia

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