Market Snapshot. Markets Dance Cautiously in Data Waiting Room. Thursday, 06 February 2014

Transcription

1 Market Snapshot Thursday, 06 February 2014 Markets Dance Cautiously in Data Waiting Room WHAT S NEWS US private payrolls grew less in January, but the services sector remains strong. Indonesia s economy grew 5.78% in EQUITY MARKETS S&P 500 DJ Euro Stoxx % 0.1% THE DAY AHEAD The ECB meets today, no clear indication of rates decision. The US releases its weekly jobs benefits data, alongside trade data for December. DEVELOPED MARKET EQUITIES Markets Uninspired Before ECB Meet, Nonfarm Payrolls US markets danced between gains and losses, finally ending lower, uninspired. Data released gave no firm indication of growth, with a slightly lower private jobs number, but solid services sector read. But these play second fiddle to the government s nonfarm payrolls number due Friday, that could have more-than-doubled in January. Private payrolls grew 175,000 in January, lower than the revised 227,000 logged in December. The Institute of Supply Management said the services sector continues to grow at a steady clip, its gauge of growth rising in January to Any number above 50 indicates expansion. In corporate news, Merck rose despite missing profit estimates as it promised to throw itself into developing an experimental drug. Walt Disney rose as its studio division gave strength to 1Q results. Twitter however slid 10% as its net loss widened despite getting more revenues from Madison Avenue s advertising pool. Federal Reserve bank presidents said the Fed won t be easily deterred from reducing its massive stimulus programme despite volatility in the global stock markets. The Richmond Fed s Jeffrey Lacker said the hurdle for pausing taper ought to remain pretty high. The Chicago Fed s Charles Evans agreed. Philadelphia Fed s Charles Plosser took this further, wanting a faster pace of scale back to reflect a stronger 3% economic growth this year. Among these, only Mr. Plosser has a vote on monetary policy this year. Europe equities were lacklustre with a mixed bag of data. Eurozone retail sales fell 1.6% on-month in December, but Markit s purchasing managers index showed business activity continues to grow. Its 52.9 read for January is the highest level since June Nikkei-225 MSCI Asia ex-japan MSCI Emerging Markets Shown in local currency terms, as of the last business day. US TREASURY YIELD CURVE The curve shows the yield to maturity of current US bills, notes and bonds. All data is as of the close of the last business day. CALENDAR -0.4% -0.1% Event Period Survey Prior TA CPI (YoY) Jan 0.70% 0.33% US Trade Balance (USD, sa) Dec bil bil US Initial Jobless Claims 1-Feb 335, ,000 Source: Bloomberg, DBS Group Research 1.2% 1M 3M 6M 1YR 2YR 3YR 5YR 7YR 10YR 30YR 1M 3M 6M 1YR 2YR 3YR 5YR 7YR 10YR 30YR One year ago Last Close 4.0% 5.0% 3.0% 4.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0%

2 Market Snapshot 6 February Japan equities rebounded from a four-month low despite a firmer JPY, as investors gave a nod to strong earnings reports. Panasonic soared 19% as net income rose 20% and earnings nearly tripled. Toyota Motor jumped 6% after saying profits rose nearly five times, and raised its earnings forecast to a record JPY1.9 trillion for the fiscal year ending in March this year. Data released Wednesday showed salaries are not keeping up with inflation even as Japan prepares itself for higher consumption taxes come April. Japan s salarymen (and women) saw their base wage in 2013 matching levels last seen in the downturn of Prime Minister Shinzo Abe s brand of economics is likely to push inflation up, further eroding wages. ASIA EQUITIES Asia Stocks Mixed as Investors Digest Data Thread Asia s stock markets were mixed, with some markets rising after a US factory output report came in better than expected on Tuesday, while others were hurt as they caught up to the string of soft manufacturing news after the recent holiday season. South Korea s Kospi closed 0.2% higher. Hyundai Development leading the construction sector s outperformance after the homebuilder was upgraded by a local brokerage. Hong Kong s Hang Seng fell 0.6% after data showed Macau s gaming sector brought in lesser revenues than expected. Taiwan s Taiex slumped 2.3% on the first day of trading after the Lunar New Year holidays. Taiwan Semiconductor Manufacturing led losses on the bourse. In Southeast Asia, Singapore s STI closed 0.2% lower. Malaysia s KLCI rose 0.4%, while Indonesia s JCI climbed 0.7%. Indonesia s economy grew 5.72% in the three months ended December 2013, taking full-year growth to 5.78%. But when compared to the quarter ending September, growth fell 1.42%. Exports surged 10.3% in December, leading to a USD1.5 billion trade surplus, but this may have been due to mining companies bringing forward their shipments before a ban on mineral and tin ore exports starting January. India s Sensex climbed as investors sought bargains in carmakers and metal producers. Mahindra, Tata Motors, Tata Steel and Hindalco Industries all gained more than 2%. FIXED INCOME US Treasuries fell a second day ahead of government numbers on Friday that are expected to show jobs increased in January handing the Fed more reason to keep reducing its debt purchase programme. Benchmark 10-year yields rose to 2.67%. COMMODITIES Oil on the Nymex rose as frigid weather saw higher demand for heating fuels meaning smaller stockpiles. The Energy Information Administration reported a 2.4 million barrel fall in inventories to million last week. Gold and Silver futures rose as investors focused on a smaller rise in ADP payroll numbers, polishing their appeal as safe-havens. Gold was up 0.45%. Silver gained 0.1%, adding to yesterday s 3.8% uptick. Source: Bloomberg, DBS Group Research and Vickers (DBS), Dow Jones Newswires, Reuters, Agence France-Presse Equity Markets Returns of equity indexes around the world, in local currency terms. Index Close Overnight YTD US DJIA % -6.86% S&P % -5.23% NASDAQ % -3.95% Europe Euro Stoxx % -3.11% Germany DAX % -4.56% France CAC % -4.15% UK FTSE % -4.31% Asia MSCI AxJ % -7.65% Japan Nikkei % % China SHCOMP % -3.92% Hong Kong Hang Seng % -8.74% Taiwan TWSE % -4.03% South Korea Kospi % -5.97% Indonesia JCI % 2.58% Malaysia KLCI % -4.34% Singapore STI % -6.55% India Sensex % -4.30% Emerg. Mkt MSCI EM % -8.59% Government Bonds Benchmark yields of major 10-year government bonds. Latest yield Previous yield Change (bps) US 2.67% 2.63% 3.81 Germany 1.64% 1.65% Japan 0.60% 0.61% China 4.53% 4.53% 0.00 Taiwan 1.61% 1.63% South Korea 3.55% 3.54% 0.10 Indonesia 9.07% 9.07% 0.30 Singapore 2.41% 2.39% 2.00 India 8.71% 8.68% 2.90 Commodity futures Prices of one-month futures contracts, grouped by commodity type. Close 1-day change 1-yr high 1-yr low WTI crude ($/bbl) % Gold ($/oz.) % Copper ($/ton) % Corn (cents/bu.) % Soybean (cents/bu.) % Wheat (cents/bu.) % Coffee (cents/lb) % Sugar (cents/lb) % Source: Bloomberg, as at the close of the last business day. O/N refers to overnight. YTD refers to year-to-date returns.

3 Market Snapshot 6 February CURRENCIES The Aussie paused for a breather after a rally in which short-sellers were forced to cover their positions. On Tuesday, the Reserve Bank of Australia kept rates steady and refrained from talking down the currency. The Aussie started today higher, as December s trade balance swung to a surprise AUD468 million surplus. A AUD200 million deficit was expected. Retail sales also rose 0.5% on-month in December as expected. The RBA releases its quarterly monetary policy statement tomorrow. The Kiwi gained as rosy jobs data added to speculation the Reserve Bank of New Zealand could raise rates from a record-low 2.5% as early as March. Employers hired 1.1% more workers in 4Q-13 from 3Q, sending the jobless rate down to 6%. The yen edged higher on Wednesday as confidence remained fragile ahead of the European Central Bank s meeting on Thursday and US nonfarm payrolls on Friday. This cautiousness carried on into Thursday morning. Source: Bloomberg, DBS Group Research and Vickers (DBS), Dow Jones Newswires, Reuters, Agence France-Presse FX Round-up Currencies as of New York close. Last Overnight change Day high Day low EUR/USD % GBP/USD % USD/JPY % AUD/USD % NZD/USD % USD/CAD % USD/SGD % AUD/SGD % NZD/SGD % GBP/SGD % EUR/SGD % EUR/AUD % AUD/NZD % XAU/USD % Source: Bloomberg. SGD Against Major Currencies USD/SGD AUD/SGD NZD/SGD GBP/SGD EUR/SGD 88 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 USD Against Major Currencies EUR/USD GBP/USD USD/JPY AUD/USD NZD/USD 94 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Source: Bloomberg. Technical Summary Short-term technical readings with a two-week horizon. All figures are as of the last business day. Currency Short term Direction Support 1 Support 2 Resistance 1 Resistance 2 EUR/USD Range GBP/USD Range USD/JPY Range AUD/USD Range NZD/USD Range USD/CAD Bullish USD/SGD Range AUD/SGD Range NZD/SGD Range GBP/SGD Range EUR/SGD Range EUR/AUD Range AUD/NZD Range XAU/USD Range Source: DBS CIO Office. Note: These are short-term technical readings with a two-week horizon. All figures are as of last business day.

4 Market Snapshot 6 February Insights Feature Vietnam: Entering a Period of Stability and Growth One currency stood out in the recent spate of emerging Asia worries: the Vietnam dong (VND). While concerns about the economic sustainability in Asia sent currencies across the region tumbling, the VND bucked the trend and has appreciated against the USD by about 0.07% since the start of the year. And if we go back further, it was up against the greenback by about 0.7% since July last year. While the VND is not a widely traded currency and capital controls more or less shields it from the recent debacle. But there is no denying that economic stability is finally taking hold. That probably has added some degree of confidence in the VND. Recall that the economy was stuck in an economic quagmire of exceptionally high inflation from Inflation soared to 28.3% in August 2008 and 23% in August The VND was under tremendous pressure, and fell by about 31% then. Lastly, recent strong performance in electronics export sales is strong testament on the earlier efforts to promote growth in the manufacturing sector. Step by step, Vietnam is emerging from its recent pains of liberalising and growing its economy too rapidly. Those lessons learnt have now been put to good use and we see this economy entering a phase of sustainable economic development in the coming years Asia s Currencies Against the USD Now, inflation has stabilised at about 6% while growth is hovering at a more sustainable level of about 5-6%. The State Bank of Vietnam seems able to keep its monetary policy stable for the first time in many years. While it remains to be seen whether such economic stability will persist, there are already glimpses of that. Measures were introduced to rein in developmental expenditure and to cut down on subsidies, so as to bring about a stronger fiscal position. Though banking sector reform and restructuring in the State-Owned Enterprises remain a work in progress, these objectives are expected to be achieved, albeit with some effort. Source: DBS Group Research Source report: DBS Group Research, Daily Breakfast Spread. 5 February Summarised by DBS Group Wealth Management /CIO Office. Bond risk rating changes Risk rating Effective Bond Name Issuer New Existing Reason 27/1/2014 LLOYDS 15 01/22/29 LBG CAPITAL NO.2 PLC 4 5 Tenor Reduction Information updated as of 03 February 2014.

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