Market Snapshot Thursday, 19 September 2013
Fed Doves Fly, Market Soar as Bernanke Delays Stimulus Cuts Global Equities
Key Global Indices Index US DJIA US S&P 500 US NASDAQ UK FTSE 100 Nikkei 225 Europe DJ STOXX 600
Last
Change (%)
YTD (%)
15676.94 1725.52 3783.64 6558.82 14505.36 313.28
0.95 1.22 1.01 -0.17 1.35 0.43
19.63 20.99 25.31 11.21 39.54 12.01
Asia & Emerging Markets Index Singapore STI Hong Kong Hang Seng Shanghai SE Composite India Sensex Taiwan TWSE Malaysia KLCI Korea KOSPI Indonesia JCI Thailand SET Brazil BOVESPA Russia RTS
Last
Change (%)
3193.85 23117.45 2191.85 19962.16 8209.18 1771.40 2005.58 4463.25 1439.13 55702.90 1429.62
0.41 -0.27 0.29 0.80 -0.49 -0.20 0.00 -1.20 -0.32 2.64 -0.71
0.85 2.03 -3.41 2.76 6.62 4.88 0.43 3.40 3.39 -8.61 -6.38
Fixed Income Last 2-yr US Treasury 5-yr US Treasury 10-yr US Treasury 3M Sibor 3M Libor
0.32 1.42 2.69 0.37 0.25
YTD (%)
Previous Day Close 0.37 1.61 2.85 0.37 0.25
Next up: the debt ceiling. US equities shot to record highs after the US Federal Reserve said the economy was not strong enough for it to reduce its monthly USD85 billion easy money programme. There were few expecting no drawdown. And they were right. A Bloomberg News survey of 64 analysts showed that 33 predicted a cut of USD5 billion while the remainder were looking at a USD10 billion cut from its Treasury bond portion at the end of its two-day Federal Open Market Committee meeting. Fed chairman Ben Bernanke and his cohort voted to leave the programme, known as Quantitative Easing, alone by a 9-1 margin. The Dow (+1%) and the S&P 500 (+1.2%) reached new records while the Nasdaq soared 1% to its highest close since 2000. Mr. Bernanke and the Fed said: A looming debt fight between the White House and their opponents in Congress could derail a recovery There was inconclusive evidence the US economy is on a firm growth path Mortgage rates are up, and the Fed needs to keep rates down to help prop up the housing market There was no timetable to taper its asset-purchase plan The US economy is now forecast to grow between 2-2.3% this year, down from a June forecast of between 2.3-2.6%.
The major concern appears to be the debt ceiling. A compromise needs to be reached between Washington’s two warring political factions by Change (bps) October, otherwise the government will shut down. Already, Republicans are set on getting rid of Mr. Obama’s healthcare programme or they -5.04 won’t be able to seek compromise on the debt ceiling. -18.26 -15.90 0.00 0.05
Europe shares rose ahead of the Fed’s taper or no taper decision. The DJ Stoxx 600 closed 0.4% higher while the FTSE 100 fell after the Bank of England said there was no reason for additional stimulus.
iBoxx US Treasuries TR Index (USD)
Southeast Asia
214
Southeast Asia stocks ended mixed as investors held positions ahead of the Fed decision. Singapore's STI rose 0.4% while Malaysia's KLCI was down 0.2%. Indonesia’s JCI fell by 1.2%.
212 210
North Asia
208
206
Most Asian markets were quiet in a wait-and-see mode ahead of the Fed decision to keep its stimulus intact. China stocks closed higher ahead of an extended weekend with many investors sitting out until after the US Federal Reserve shows its hand. China markets are closed Thursday and Friday for the mid-autumn festival. Hong Kong equities fell in subdued trade as investors chose inactivity. Italian luxury goods maker Prada fell 1.4% after it warned sales slowed in September.
204 202 200 198 196
Aug-13
Jul-13
Jun-13
May-13
Apr-13
Mar-13
194
Source: Bloomberg, iBoxx Limited. Data stated in local currency terms and is as of the last business day.
Japan equities rose to an eight-week high ahead of the FOMC decision with the Nikkei 225 up 1.4%. Early Thursday, the government said exports were up in August for the sixth straight month to its highest level since 2010. A weaker yen and a stronger overseas market have fuelled demand for Japanese products. Japan’s trade deficit was around JPY960 billion, the government said, beating estimates by a Bloomberg survey of analysts.
Market Snapshot 19 September 2013
Commodities
South Asia Last
Gold Crude oil Wheat Corn Soybean Sugar Coffee
1363.77 108.07 646.50 456.25 1347.75 481.10 114.90
O/N Change (%) 4.06 2.51 0.54 0.50 0.39 0.19 -0.04
52-week High 1796.08 112.24 916.50 800.00 1686.00 582.50 200.00
52-week Low 1180.57 84.05 623.00 450.00 1271.00 456.70 114.25
Commodities Research Bureau (CRB) Index 490
India markets ended higher on gains in index-linked blue chips and consumer goods as some traders took positions ahead of the US Federal Reserve policy outcome. The Sensex spiked 0.8%.
Fixed Income US Treasury bonds posted the biggest one-day price rally in nearly two years as the Federal Reserve’s surprising decision not to pare down its asset purchases fuelled a bond-buying frenzy. This means that there is no reduction in the USD85 billion the Fed pumps into markets monthly. About USD40 billion of that goes into Treasury bonds. The benchmark 10-year UST note rose by 1 11/32 to yield 2.65%.
Commodities Crude oil rallied, posting their largest gains in more than three weeks after the Federal Reserve said they would keep buying bonds at its current pace.
480
470
Gold pushed higher after the Fed announcement with the promise of more easy money to fuel bullion buying. Copper futures were higher on the London Metal Exchange in cautious trade ahead of the Fed decision.
460
Sources: Bloomberg, DBS Group Research and Vickers (DBS), Dow Jones Newswires, Reuters
Aug-13
Jul-13
Jun-13
May-13
Apr-13
Mar-13
450
Source: Bloomberg, iBoxx Limited Data stated in local currency terms and is as of the last business day where applicable. O/N represents overnight.
INSIGHTS Germany: Elections to set Euro Tone Elections in the German state of Bavaria last weekend set the tone for the upcoming federal polls this Sunday. As incumbent Chancellor Angela Merkel contests in a bid to win her third term, one of her key coalition partners, the Christian Social Union, or CSU, claimed victory at the Bavarian polls according to exit polls. What this means is that there is a good chance Merkel and her CSU party will return to power following Sunday’s vote. Whatever happens, how Germany approaches its euro area commitments and priorities will be the hot potato following the election. Leading private polls have put Merkel’s Christian Democratic Union and CSU in the lead backed by around 40% of respondents. Next was the biggest opposition party, the Social Democrats, at 25%. The Bavarian support has increased the chances of a continuation of the CDU/C SU alliance. Either way, the broad consensus is for Chancellor Merkel to retain office, with her choice of coalition partner emerging as the larger unknown. The available options are a) the continuation of the current set-up or b) if the Free Democrats, the CDU’s smaller coalition partner, fare poorly at the centre, then the CDU/CSU partnership might join hands with the Social Democrats. Implications on policies could differ modestly depending on the members of the coalition set-up. A continuation of the existing CDU-CSU-Free Democrats is unlikely to herald any major changes, with the tough stance on the resolution mechanism for the banking union and potential third Greek bailout likely to dominate the discussions soon after the elections. Germany has maintained that any decisions to centralise the Single Resolution Mechanism would require amendment of few selected EU treaties. However, the ECB and European Commission differ in their plans. Thereby the progress on the resolution mechanism and the deposit guarantee initiative might progress at an incremental and cautious pace. This stance was also backed by an early-September YouGov Deutschland survey, which showed there was very limited public appetite for more Eurozone integration, while a full 55% of Germans agree that Germany should keep the euro but membership should be restricted to a select group of more similar countries. On the other hand, a decision to tie in the SDP in the CDU-CSU alliance could result in thawing of the austere position on extending aid to the peripheral countries and focus will be on integrating the currency area. Source report: DBS Group Research. Daily Breakfast Spread. 18 September 2013. (Summarised by DBS Group Wealth Management /CIO Office.)
Market Snapshot 19 September 2013
FX Pulse Currencies
FX Round-up O/N Change (%) 1.21 -1.20 1.75 1.61 1.52 -1.04 0.00 -0.53 0.71 0.53 0.48 0.14 0.17 -0.29
Last EUR/USD USD/JPY AUD/USD NZD/USD GBP/USD USD/SGD USD/CNY EUR/AUD AUD/SGD NZD/SGD GBP/SGD AUD/NZD EUR/SGD EUR/GBP
1.3521 97.94 0.9520 0.8370 1.6146 1.2465 6.1210 1.4204 1.1868 1.0432 2.0128 1.1372 1.6855 0.8375
O/N High 1.3542 99.34 0.9529 0.8383 1.6163 1.2610 6.1225 1.4300 1.1881 1.0458 2.0150 1.1401 1.6884 0.8399
O/N Low 1.3338 97.76 0.9336 0.8206 1.5893 1.2464 6.1203 1.4194 1.1717 1.0332 1.9976 1.1343 1.6744 0.8353
The dollar closed lower after the Fed defied markets by not reducing its bondbuying programme. The USD fell sharply against the euro, reaching levels not seen since early February. th
The yen fell after the government said Japan’s trade deficit was in its 14 month despite an increase in exports. A weaker yen helps exports. The kiwi rose in early Asian trade after Wellington reported better-than-expected GDP numbers. The government said 2Q GDP was up 2.5%, beating a Bloomberg survey of economists expecting an increase of 2.3%. Sources: Bloomberg News, Dow Jones Newswires, Reuters.
SGD VERSUS MAJOR CURRENCIES 107
USDSGD
AUDSGD
GBPSGD
CNYSGD
NZDSGD
102
97
92
Aug-13
Jul-13
Jun-13
May-13
Apr-13
Mar-13
87
Source: Bloomberg Data stated in local currency terms and is as of the last business day where applicable. O/N represents overnight.
TECHNICAL SUMMARY Currency
Short term Direction
Support 1
Support 2
Resistance 1
Resistance 2
EUR/USD
Bullish
1.3415
1.3337
1.3596
1.3711
GBP/USD
Bullish
1.6025
1.5890
1.6177
1.6380
USD/JPY
Range
96.83
95.79
99.33
100.60
AUD/USD
Bullish
0.9430
0.9333
0.9560
0.9715
NZD/USD
Bullish
0.8295
0.8204
0.8465
0.8585
USD/CAD
Bearish
1.0133
1.0011
1.0317
1.0357
USD/SGD
Bearish
1.2400
1.2262
1.2555
1.2609
AUD/SGD
Bullish
1.1695
1.1570
1.1880
1.1950
NZD/SGD
Bullish
1.0295
1.0130
1.0525
1.0592
GBP/SGD
Bullish
1.9867
1.9702
2.0222
2.0275
EUR/SGD
Bearish
1.6720
1.6640
1.6966
1.7046
EUR/AUD
Bearish
1.4159
1.3859
1.4404
1.4585
AUD/NZD
Range
1.1217
1.1024
1.1432
1.1542
XAU/USD
Range
1334
1291
1390
1416
Source: DBS CIO Office Note: These are short-term technical readings with a two-week horizon. All figures are as of last business day.
Market Snapshot 19 September 2013
Economic Calendar – 19 September 2013 Country
Event
Period
Survey
Actual
Prior
US
Initial Jobless Claims
Sep-13
330K
--
292K
US
Philadelphia Fed Business Outlook
Sep
10
--
9.3
US
Existing Home Sales MoM
Aug
-2.50%
--
6.50%
Focus
US existing home sales may have tipped lower in August, though the outlook for the Philly area looks up.
Source: Bloomberg
Bond risk rating changes Effective
Bond Name
12/09/2013
HTHROW 6 1/4 09/10/18
Issuer
HEATHROW FUNDING LTD
Risk rating New
Existing
3
4
Reason
Tenor reduction
Information updated as of 16 September 2013. Disclaimers and Important Notice The information herein is published by DBS Bank Ltd. (“DBS Bank”) and is for information only. This publication is intended for DBS Bank and its clients to whom it has been delivered and may not be reproduced, transmitted or communicated to any other person without the prior written permission of DBS Bank. This publication is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the public to subscribe to or enter into, for cash or other consideration, any transaction, and should not be viewed as such. This publication is not intended to provide, and should not be relied upon for accounting, legal or tax advice or investment recommendations and is not to be taken in substitution for the exercise of judgment by the reader, who should obtain separate legal or financial advice. DBS Bank does not act as an adviser and assumes no fiduciary responsibility or liability for any consequences financial or otherwise. The information and opinions contained in this publication has been obtained from sources believed to be reliable but neither DBS Bank nor any of its related companies or affiliates (collectively “DBS”) makes any representation or warranty as to its adequacy, completeness, accuracy or timeliness for any particular purpose. Opinions and estimates are subject to change without notice. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment. DBS accepts no liability whatsoever for any direct indirect or consequential losses or damages arising from or in connection with the use or reliance of this publication or its contents. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this publication, which may arise as a result of electronic transmission. If verification is required, please request for a hardcopy version. Country Specific Disclaimer China: This report is distributed in China by DBS Bank (China) Ltd. Indonesia: This report is made available in Indonesia through PT DBS Indonesia. PT DBS Indonesia is regulated by Bank Indonesia. Singapore: This report is distributed in Singapore by DBS Bank Ltd. DBS Bank Ltd Co. Reg. No.: 196800306