The global equity market rout took a brief hiatus on Friday, but it appeared set to return on Monday, with Singapore shares facing a negative lead from early Asian trading.
Stephen Innes, head of Asia Pacific trading at OANDA, pointed the finger at the U.S. Federal Reserve’s hiking cycle for dampening sentiment.
“Maybe and just maybe investors are waking up to the fact that much of this market frothiness is a result of financial engineering aided by the intravenous drip of seemingly endless supplies of cheap money,” Innes said in a note on Monday. “The result could very end up being a stock market built on a leveraged House of Cards which is about to topple after the U.S. tax cuts have run their course.”
Japan’s Nikkei 225 opened down 1.20 percent, while South Korea’s Kospi shed 0.70 percent.
Singapore’s Straits Times Index ended Friday up 0.72 percent at 3069.17; October futures were at 3070.00 on Friday, while November and December futures were at 3073 and 3071 respectively.
Hong Kong’s Hang Seng Index ended up 2.12 percent at 25,801.49, while China’s CSI 300 rose 1.49 percent to 3170.726.
Indonesia’s IDX Composite was up 0.94 percent on Friday at 5756.49.
In the U.S., the Dow Jones Industrial Average added 1.15 percent to 25,339.99, the Nasdaq Composite gained 2.29 percent to 7496.894 and the S&P 500 rose 1.42 percent to 2767.13.
The U.S. dollar index was at 95.34 at 7:10 A.M. SGT, around Friday’s highs, after it touched levels as low as 94.96 at the start of Friday’s session, but it remained below the levels above 96 it reached earlier in the month, according to ICE futures data.
The 10-year U.S. Treasury note yield was at 3.162 percent at 5:12 P.M. ET on Friday after touching levels as low as 3.132 percent and as high as 3.184 percent in that session, according to Tullett Prebon data.
“The dollar is falling because investors are looking at the decline in stocks as a U.S. dollar story,” Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management, said in a note on Friday. She noted that the U.S. Federal Reserve has raised interest rates by 75 basis points this year so far, with another hike expected in December.
“For next year, the market is starting to price in three rounds of tightening,” she said. “Investors are worried that these rate hikes will create an economic crisis. We know that rising rates is a big problem for the housing market, but trade wars combined with higher interest rates makes businesses and investors more conservative which could lead to lasting weakness in U.S. equities.”
The euro/dollar was at 1.551 at 7:27 A.M. SGT, after trading in a 1.1533 to 1.1610 range on Friday, off levels as high as 1.1815 in late September and as low as 1.1429 earlier this month, according to DZHI data.
“The euro found a bottom this past week but it is too soon to declare victory for the bulls,” Lien said, noting the rally was modest and wasn’t supported by data.
“The only thing that the euro has going for it are hawkish comments from ECB officials. A number of them, including Mario Draghi, have been talking about the upside risks to inflation,” she said. “Despite last week’s decline, oil prices have been strong and the weaker euro drives up price pressures. This message should not ignored because the longer the euro remains weak, the louder these comments will be.”
The dollar/yen was at 112.231 at 7:28 A.M. SGT, after trading in a 111.85 to 112.497 range on Friday, according to DZHI data.
The dollar/yuan ended Friday at 6.9181 after trading in a 6.8871 to 6.9278 range during the session, according to DZHI data.
The dollar/Singapore dollar was at 1.3786 at 7:29 A.M. SGT, after trading in a 1.3728 to 1.3785 range on Friday, according to DZHI data.
The dollar/Indonesian rupiah closed Friday at 15,200 after trading in a 15,175 to 15,230 range during the session, according to DZHI data.
The dollar/Malaysian ringgit closed Friday at 4.1530 after trading in a 4.1515 to 4.1530 range during the session, according to DZHI data.
Nymex WTI crude oil futures for November were up 1.23 percent at US$72.22 a barrel at 7:05 A.M. SGT, while ICE Brent crude futures for December were up 1.55 percent at US$81.68 a barrel at 7:05 A.M. SGT, according to Bloomberg data.