Singapore market trends Thursday: US dollar rallies amid strong service sector data

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

Singapore shares will likely focus on Thursday on the combination of a strong rally in the U.S. dollar in the previous session and gains on Wall Street.

Wall Street and the dollar got a boost from a strong U.S. services sector reading, with the ISM non-manufacturing index rising to its highest level since the Clinton administration.

“Business sentiment is near all-time highs and no wonder with the stock market making new highs each day,” Chris Rupkey, chief financial economist at MUFG, said in a note on Wednesday U.S. time.

“But wait, they also say there is a labor shortage and higher tariffs are making materials more costly and this is eating into earnings,” he noted. “For now, it’s a big party for this economy, and companies will party like it’s 1999 until at least 2019.”

Indexes

In early trade, Japan’s Nikkei 225 index was up 0.45 percent, while South Korea’s Kospi was down 0.42 percent.

Singapore’s Straits Times Index ended Wednesday up 0.76 percent at 3267.40; October futures for the index were at 3270 on Wednesday, while November and December futures were at 3273 and 3271.

Hong Kong’s Hang Seng Index shed 0.13 percent to 27,091.26 on Wednesday. China’s markets were closed on Monday and Tuesday and will be closed on Wednesday; China’s CSI 300 gained 1.04 percent to end at 3438.865 on Friday.

Indonesia’s IDX Composite Index fell 0.13 percent to close at 5867.74 on Wednesday.

The Dow Jones Industrial Average ended up 0.20 percent at 26,828.39, the Nasdaq Composite rose 0.32 percent to 8025.085 and the S&P 500 edged up 0.07 percent to 2925.51. Futures for the three indexes were down in early trade.

Currencies

The U.S. dollar index, which measures the greenback against a basket of currencies, was at 96.06 at 7:52 A.M. SGT, around Wednesday’s high, as the buck had climbed steadily through the previous session from as low as 95.28 in early trade, according to ICE futures data.

The 10-year U.S. Treasury note yield was at 3.199 percent at 7:59 A.M. SGT, after spiking higher from as low as 3.063 percent early on Wednesday, according to Tullett Prebon data.

Dollar climbs

Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, said in a note late on Wednesday U.S. time that the dollar’s rally was likely “durable.”

“[Wednesday’s] move was driven by the classic story of economic dominance. The largest economy in the world is growing the fastest. While economic reports from around the world surprised to the downside, U.S. data is consistently beating expectations and reinforcing the positive momentum,” she said.

She pointed to strong U.S. economic data, particularly non-farm payrolls, hawkish comments from the Federal Reserve, no resistance for 10-year U.S. yields before they hit 3.5 percent and less-than-stellar data from outside the U.S. as all helping to bolster the dollar.

Euro drops

The euro/dollar was at 1.1477 at 8:06 A.M. SGT, after trading in a 1.1463 to 1.1594 range on Wednesday, continuing the pair’s steady slide over the past week, according to DZHI data.

“The primary reason for the euro’s decline was U.S. dollar strength,” Lien said. “German bond yields increased significantly today which should have been positive for the single currency especially as Italian yields declined but the market’s demand for U.S. dollars was just too strong.”

She noted that Italian Economy Minister Tria’s pledge to reduce debt to meet the EU requirements has helped to stem some of the selling pressure on Italian bonds.

The dollar/yen was at 114.481 at 8:08 A.M. SGT after trading in a 113.49 to 114.542 range on Wednesday, according to DZHI data.

The dollar/yuan ended Wednesday at 6.8679 after trading in a 6.8650 to 6.8688 range, according to DZHI data.

The dollar/Singapore dollar was at 1.3805 at 8:10 A.M. SGT after trading in a 1.3718 to 1.3799 range on Wednesday, according to DZHI data.

The dollar/Indonesian rupiah ended Wednesday at 15,070 after trading in a 14,984 to 15,090 range during the session, according to DZHI data.

Oil

Nymex WTI crude oil futures for November were down 0.24 percent at US$76.23 a barrel at 7:43 A.M. SGT, while ICE Brent crude oil futures for December were up 1.76 percent at US$86.29 a barrel at 5:57 A.M. SGT, according to Bloomberg data.

Read more: Crude oil mixed ahead of Asia open after U.S. inventory data

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