Singapore’s shares face a tough Friday session, as the global equity market rout continued on Thursday, but signs that the pace of the selloff was slowing have emerged.
Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management pointed to a possible vicious circle.
“Given the magnitude of the moves seen this week, there’s no doubt that sentiment is shifting,” she said in a note on Thursday U.S. time.
“Unfortunately, the declines can become lasting as investors who fear further losses take profits on positions they have held onto for some time,” Lien said. “A lot of money was made in the equity market over the past 2 years and with U.S. interest rates expected to rise further, liquidation or the usage of stops to protect these positions will become even more attractive to investors. And when these stops are triggered, the selling will exacerbate.”
Japan’s Nikkei 225 index was down 0.16 percent at 8:22 A.M. SGT, while South Korea’s Kospi was up 0.58 percent at 8:28 A.M.
Singapore’s Straits Times Index ended Thursday down 2.69 percent at 3047.39; October futures for the index were at 3043 on Thursday, while November and December futures were at 3047 and 3044.
Hong Kong’s Hang Seng Index shed 3.54 percent on Thursday to 25,266.369, while China’s CSI 300 plunged 4.80 percent to 3124.114.
Indonesia’s IDX Composite ended Thursday down 2.02 percent at 5702.82.
The Dow Jones Industrial Average ended Thursday down another 2.13 percent at 25,052.83, the Nasdaq Composite dropped 1.25 percent to 7329.061, and the S&P 500 tumbled 2.06 percent to 2728.37. Futures for the three indexes were solidly higher in early trade.
The U.S. dollar index, which measures the greenback against a basket of currencies, was at 95.04 at 8:09 A.M. SGT, down from as high as 95.39 on Thursday and levels as high as 96.14 earlier in the week, according to ICE futures data.
The 10-year U.S. Treasury note yield was at 3.166 percent at 8:20 A.M. SGT, off levels as high as 3.191 percent in Thursday’s session and as high as 3.261 percent earlier in the week, according to Tullett Prebon data.
BK Asset Management’s Lien noted that the greenback was hurt by the equity selloff, but it was unusual that risk currencies didn’t fall.
“Investors are looking at this as a U.S. story because the Federal Reserve is the only major central bank tightening monetary policy,” she said. She noted that U.S. consumer price index data missed expectations.
The CPI rose a less-than-expected 0.1 percent in September, after rising 0.2 percent in August, Labor Department data showed, Reuters reported.
The euro/dollar was at 1.1593 at 8:22 A.M. SGT after trading in a 1.1524 to 1.1599 range on Thursday, off levels as low as 1.1429 earlier in the week, according to DZHI data.
The dollar’s weakness benefited the euro, Lien said.
“We’ve heard quite a bit of comments from Eurozone policymakers recently about rising inflation including from President Draghi and the message is consistent, which is that price pressures are growing,” she said. “Part of this is due to the higher oil prices but the weaker euro also boosts inflation.”
The dollar/yen was at 112.177 at 8:23 A.M. SGT after trading in a 111.9 to 112.225 range on Thursday, down from levels as high as 114.55 earlier this month, according to DZHI data.
The dollar/yuan ended at 6.8898 on Thursday after trading in a 6.8858 to 6.9330 range, still up from levels as low as 6.8650 it touched during last week’s holiday, according to DZHI data.
Stephen Innes, head of Asia Pacific trading at OANDA, said on Friday that the dollar/yuan pair’s decline helped ease anxiety that China could let its currency fall.
He noted that followed a Bloomberg report, citing sources, that the U.S. Treasury Department’s staff advised Treasury Secretary Steven Mnuchin that China wasn’t manipulating its currency.
“If Trump and Munichin accept these finding at face value, which the market agrees with, could avert an emerging-market Asia currency meltdown,” Innes said.
But he added, “the overnight chatter does suggest that at a minimum there will be a softer tone on the currency manipulator theme, although the unpredictable nature of commander-in-chief Donald Trump does raise the level of uncertainty, and there could be more risk-reduction into the weekend as investors position more defensively.”
Singapore dollar strengthens
The dollar/Singapore dollar was at 1.3754 at 8:26 A.M. SGT after trading in a 1.3757 to 1.3839 range on Thursday, according to DZHI data.
The Singapore dollar appeared to get a fillip after advance estimates for the city-state’s gross domestic product growth came in at 2.6 percent on-year for the third quarter, beating forecasts for 2.4 percent, local media reported. The Monetary Authority of Singapore also said on Friday that it would allow effectively tighten policy, which would allow the currency to rise.
The dollar/Indonesian rupiah ended Thursday at 15,230 after trading in a 15,198 to 15,265 range, according to DZHI data.
Nymex WTI crude oil futures for November were up 0.17 percent at US$71.09 a barrel at 7:59 A.M. SGT, while ICE Brent crude oil futures for December were down 3.41 percent at US$80.26 a barrel at 5:59 A.M. SGT, according to Bloomberg data.