Singapore’s shares may stumble out of the gate on Tuesday as traders may be removing some of their chips after Monday’s strong rally amid a likely mix of profit-taking and concerns a U.S.-China trade deal may not be as strong as it was billed.
Despite the global market rally on Monday, analysts said markets have curbed their enthusiasm over the potential rapprochement in the U.S. trade war with China.
“Aside from the initial move at the open, there was no continuation or additional gains during the North American session for stocks, the U.S. dollar or high beta currencies,” Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management, said in a note on Monday, U.S. time.
“This tells us that investors were not impressed by the ‘deal,'” she said, noting that none of the commitments White House figures are claiming China made have been confirmed by China’s President Xi Jinping.
But she added, “the good news is that for the over two months, we’re probably going to hear more conciliatory headlines from both sides as they press the gas on negotiations. This would be good for risk appetite, equities and currencies.”
As the deadline gets closer, however, the tone could shift, Lien noted.
Verbal trade agreement
White House economic adviser and former CNBC commentator Larry Kudlow said on Monday that the U.S. would push for quick action from China on the newly reached verbal trade agreement with China. It would need to be quick for the agreement to stick: The White House reportedly said a 90-day clock started from 1 December.
The U.S. trade war appeared to hit the pause button at the G-20 meeting in Buenos Aires over the weekend, with U.S. President Trump and Xi agreeing to hold off on planned tariff increases for 90 days while trade talks continue. The dinner meeting between the two had been closely watched, with markets already beginning to price in optimism ahead of time that something positive might emerge.
The Trump administration has put a 10 percent tariff on US$200 billion worth of imports from China; before this latest agreement, that had been set to increase to 25 percent on 1 January. In exchange, China has agreed to start buying “a not yet agreed upon, but very substantial” amount of U.S. products, effective immediately.
U.S. Treasury Secretary Steve Mnuchin reportedly said that China made US$1.2 trillion in trade commitments, but no details of what that meant had been hammered out.
Japan’s Nikkei 225 index was down 0.12 percent at 8:03 A.M. SGT, while South Korea’s Kospi was off 0.28 percent at 8:08 A.M. SGT.
Singapore’s Straits Times Index surged 2.34 percent to 3190.62 by Monday’s close; December futures were at 3187 on Monday, while January and February futures were at 3190 and 3192, respectively.
Hong Kong’s Hang Seng Index tacked on 2.55 percent to 27,182.039 on Monday, while China’s CSI 300 added 2.78 percent to 3260.95.
Malaysia’s KLCI index rose 1.18 percent to 1699.72 on Monday, while Indonesia’s IDX Composite added 1.03 percent to 6118.32.
The Dow Jones Industrial Average rose 1.13 percent to 25,826.43, the Nasdaq Composite gained 1.51 percent to 7441.512 and the S&P 500 added 1.09 percent to 2790.37. Futures for the three indexes were slightly lower in early trade.
Nymex WTI crude oil futures for January were up 0.49 percent at US$53.21 a barrel at 7:35 A.M. SGT, while ICE Brent crude oil futures for February were up 3.75 percent at US$61.69 a barrel at 6:59 A.M. SGT, according to Bloomberg data.
“A loose verbal commitment between the Russians and the Saudis to extend a curtailment of production into 2019 contained no specific targets but was enough to boost oil to start the week,” Scotiabank said in a note on Monday.