Market Snapshot. US Stocks Edge Up on Easy Money Hopes. Tuesday, 05 November 2013

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1 Market Snapshot US Stocks Edge Up on Easy Money Hopes Tuesday, 05 November 2013 WHAT S NEWS US equities rose as the lack of compelling data boosted hopes the Fed will keep its stimulus in place. Euro area PMI rose to 51.3 in October, in line with the initial reading and forecasts. The AUD rose after the latest set of data showed the economy is recovering from a slowdown. EQUITY MARKETS S&P 500 DJ Euro Stoxx 600 Nikkei % 0.3% THE DAY AHEAD MSCI Asia ex-japan -0.5% The Reserve Bank of Australia meets today. Singapore will report October manufacturing activity. Taiwan s inflation is expected to accelerate to 1.05% onyear from 0.83% in September. DEVELOPED MARKET EQUITIES Stocks Up on Hopes for QE to Stay, Upbeat EU Data US equities rose as the lack of compelling data boosted expectations the Federal Reserve will keep its stimulus in place, giving stocks a leg up. Gains were limited as investors refused to make fresh bets ahead of key labour data due later this week. The numbers would give clues on whether the central bank will maintain its pace of asset purchases. The Dow tacked on 0.2% while both the S&P 500 and the Nasdaq were 0.4% higher. Adding to a recent string of lacklustre numbers, factory orders gained 1.7% on-month in September, shy of forecasts for a 1.8% increase. The delayed August figure showed a 0.1% fall, far from estimates for a 0.3% growth. On the policy front, St. Louis Fed President James Bullard said it was certainly possible the central bank would start tapering its bond purchases after its next meeting if the labour market continues its recovery. However, he said the Fed would not need to rush this as inflation stays low. Elsewhere, Fed Board Governor Jerome Powell said the timing of the decision to curb the stimulus is necessarily uncertain, as it depends on the evolution of the economy. Data so far has been inconclusive. In corporate news, BlackBerry abandoned plans to be taken private and said its CEO is stepping down. This raised fears the smartphone maker is struggling to reverse sales slowdown. Meanwhile, Twitter hiked its initial public offering price range by 25% and will close its books a day early, signalling a robust demand for its debut. MSCI Emerging Markets -0.1% Shown in local currency terms, as of the last business day. US TREASURY YIELD CURVE 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% 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 Event Period Survey Prior CH HSBC Services PMI Oct US ISM Non-Manf. Composite Oct SI Purchasing Managers Index Oct TA CPI (YoY) Oct 1.05% 0.83% Source: Bloomberg, DBS Group Research

2 Market Snapshot 5 November Europe equities gained as investors cheered upbeat factory data. The final reading for the region s monthly manufacturing activity rose to 51.3 in October, in line with expectations. Markit said encouraging activity build-up in production countries such as Spain, Italy and Ireland mean the recovery in the euro zone is becoming more broadbased. PMI in Germany also showed an increase last month but across the border in France, the bloc s second biggest economy, manufacturing sector stayed within contractionary territory. The Stoxx 600 rose 0.3% while the FTSE 100 ticked 0.4% up. Japan markets were closed Monday for a holiday and reopens today. ASIA EQUITIES Asia Ends Down Ahead of China s Pivotal Meeting China equities flat-lined as investors stayed on the sidelines ahead of the pivotal Communist Party meeting on 9-12 November in Beijing. The country is expected to announce its plans for the next decade, which include any stimulus or reforms initiatives. Hong Kong's Hang Seng ticked 0.3% down ahead of quarterly reports from heavyweight HSBC. The banking giant carries a 15% weightage on the benchmark. After hours, HSBC said 3Q-13 profit rose 28% but it warned of regulatory uncertainties as it became the latest lender involved in a probe into alleged foreign exchange manipulation. Southeast Asia stocks ended mostly lower, with Singapore's STI ending flat, Malaysia's KLCI falling 0.2%, and Indonesia's JCI ticking 0.2% lower. India's Sensex was closed Monday for a holiday and reopens today. FIXED INCOME US Treasuries gained as investors rushed back into the safe-haven ahead of key labour data due this week. Weaker-than-expected factory orders for both August and September also fuelled a rally. COMMODITIES Oil ended flat as traders stayed on the sidelines ahead of weekly crude inventory data. The numbers have so far showed a supply glut in the US, partly caused by high domestic production. The American Petroleum Institute will release its inventory reports today. Gold eked out a small gain as uncertainty for this week s key jobs report increased the precious metal s safety appeal. Elsewhere, physical demand in India, the world s top bullion buyer, remained muted during the biggest gold-buying festival as premiums stayed high. 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 % 19.34% S&P % 23.96% NASDAQ % 30.37% Europe Euro Stoxx % 15.31% Germany DAX % 18.72% France CAC % 17.78% UK FTSE % 14.68% Asia MSCI AxJ % 1.14% Japan Nikkei % 36.62% China SHCOMP % -5.27% Hong Kong Hang Seng % 2.35% Taiwan TWSE % 8.50% South Korea Kospi % 1.41% Indonesia JCI % 2.47% Malaysia KLCI % 7.02% Singapore STI % 1.16% India Sensex % 9.33% Emerg. Mkt MSCI EM % -2.67% Government Bonds Benchmark yields of major 10-year government bonds. Latest yield Previous yield Change (bps) US 2.60% 2.62% Germany 1.68% 1.69% Japan 0.60% 0.60% 0.00 China 4.22% 4.22% 0.00 Taiwan 1.72% 1.68% 4.00 South Korea 3.48% 3.45% 3.00 Indonesia 7.94% 7.76% Singapore 2.25% 2.25% 0.00 India 8.68% 8.68% 0.00 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 5 November CURRENCIES The EUR rallied on the back of better-than-expected data. The final reading for the region s monthly manufacturing activity rose to 51.3 in October, in line with expectations. Markit also said encouraging activity build-up in production countries such as Spain, Italy and Ireland mean the recovery in the euro zone is becoming more broad-based. The aussie tacked on after the latest data showed the economy is recovering from a slowdown. This doused hopes for another rate cuts which may devalue the currency. Retail sales rose 0.8% onmonth in September, double the amount expected. House prices recorded another gains, extending their recent, strong revival. Focus now will be on the Reserve Bank of Australia s policy meeting today. 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 86 May-13 Jul-13 Sep-13 Nov-13 USD Against Major Currencies EUR/USD GBP/USD USD/JPY AUD/USD NZD/USD 86 May-13 Jul-13 Sep-13 Nov-13 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 Range USD/SGD Bearish AUD/SGD Range NZD/SGD Range GBP/SGD Bearish EUR/SGD Bearish 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 5 November Insights Feature Asia: Getting Some Help from A European Recovery China PMIs have ticked up noticeably in the past two months. In September, the manufacturing number rose by 0.5 points to 51.2, the average of both the official and widely followed HSBC/Markit data, and the services sector jumped by nearly a point to compared to 6% in 2013 and 6.1% in There is upside potential coming from Europe and China but, unfortunately, the US has slowed and Asia s exports there have turned sideways over the past year. The latter is more important given the service sector s greater weight in GDP (45% vs 38% in 2012). Combined with the 3Q GDP growth reading of 7.8% released two weeks ago, there is growing assurance that China s growth will continue to run between quarterly 7.5% and 8% as it has for the past seven quarters. This is good news, but it gets better. Europe has stopped contracting. Why is this more important than acceleration in China? To be sure, it wouldn t be if China were really taking off or if it had just skirted a hard landing. But we believe neither are true. Plainly this deterioration will negate some of the better news coming from Europe. One up, one down Asia s domestic demand will continue to provide the base-load demand for mid-6% GDP growth next year. Asia 10 Exports to EU28 On the contrary, all signs continue to point to a government emphasis on structural change over cyclical speed and continued growth between 7.5% to 8%. Europe, though, is different. Europe has stopped shrinking and that will bring big change to Asia s export fortunes going forward. Asia s exports to Europe fell by USD99 billion in That s a big chunk of change equivalent to some 0.75% of GDP. If Asia s exports to Europe had simply run sideways, GDP growth would have been that much higher 6.8% instead of 6.1% in Exports to Europe might even start to head north in the months ahead. For now, sideways is good enough that alone should add about a half a percentage point to Asia s GDP growth in At the moment, we expect 6.4% GDP growth in the Asia-10 in 2014 Source report: DBS Group Research. Daily Breakfast Spread. 4 November Summarised by DBS Group Wealth Management /CIO Office. Bond risk rating changes Effective Bond Name Issuer New Risk rating Existing Reason 28/10/2013 UNBKIN 3 5/8 10/25/18 UNION BANK OF INDIA HK 3 4 Tenor reduction Information updated as of 31 October 2013.

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