Market Snapshot Wednesday, 02 October 2013
US Stocks Shrug Off Ransom Note from Capitol Hill 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 (%)
15191.70 1695.00 3817.98 6460.01 14484.72 312.86
0.41 0.80 1.23 -0.03 0.20 0.77
15.93 18.85 26.44 9.53 39.34 11.86
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 (%)
3181.50 22859.86 2174.67 19517.15 8187.02 1769.03 1998.87 4345.90 1408.19 53179.46 1438.04
0.43 0.00 0.00 0.71 0.16 0.02 0.10 0.69 1.81 1.61 1.09
0.46 0.90 -4.16 0.47 6.33 4.74 0.09 0.68 1.17 -12.75 -5.82
Fixed Income Last 2-yr US Treasury 5-yr US Treasury 10-yr US Treasury 3M Sibor 3M Libor
0.33 1.43 2.65 0.38 0.25
YTD (%)
Previous Day Close 0.32 1.38 2.61 0.37 0.25
US equities shrugged off misplaced priorities from Washington as some of the most basic functions of government – and American society – shuttered after Congress and the White House failed to reach a budget deal. The DJIA rose 0.4%, the S&P 500 was up 0.8% while the Nasdaq leapt 1.2% as some reports said the inability to reach a deal were already priced in. Equities moved on the possibility of the US Federal Reserve extending its accommodative monetary policy, which it said it was prepared to do because of political gridlock. There is more dysfunction on the way, with Washington about to hit its debt limit in mid-October. After this impasse, the US Congress – divided between a Republican House of Representatives and a Senate controlled by the Democratic party – will lock horns again, with battle lines drawn over US President Barack Obama’s controversial healthcare programme. This fight is the undercard to the main event: the fight over the USD16.7 th trillion debt ceiling and the government’s intention to raise it for the 75 time since 1962.
The partial US shutdown means: An estimated 0.2 percentage points shaved off GDP growth each week of the shutdown, according to research house IHS Around USD300 million in lost economic output each day Between 800,000 to 1 million US civil servants without salaries during the shutdown Visits to the Statue of Liberty, the Grand Canyon and even the Change (bps) panda-cam at Washington’s National Zoo are off, possibly leading to a larger knock-on tourism and services effect. 1.19 US trade negotiators with EU and the Pacific will put their pens 4.55 down, which could lead to slower trade deals down the line. 4.00 Visa processing will slow to a trickle, which means thousands of 0.84 would-be spenders and business people cannot visit the US. -0.30 Meanwhile, US auto sales dipped in September for the first time in four years while ISM said US manufacturing expanded to its fastest pace in around 2 ½ years.
iBoxx US Treasuries TR Index (USD) 214 212
206
Europe shares climbed as the European Central Bank (which meets today) said it would do the necessary to keep Italy functioning as investors weighed a government shutdown in the US. Stocks rose after Markit said Euro area manufacturing expanded for a third straight month.
204
Southeast Asia
210 208
202
Southeast Asia stocks rose with Singapore’s STI was up 0.4% despite public housing prices falling for the first time since February 2009. Malaysia's KLCI was unchanged while Indonesia’s JCI climbed 0.7% on trade numbers (*more below in Currencies).
200 198 196
Source: Bloomberg, iBoxx Limited. Data stated in local currency terms and is as of the last business day.
Sep-13
Aug-13
Jul-13
Jun-13
May-13
May-13
Apr-13
194
North Asia Tokyo stocks eked out a slight gain on the first day of a partial government shutter in the US, with the upbeat Tankan survey offsetting news flow from Washington. The Nikkei 225 closed 0.2% up. China and Hong Kong are closed for holidays.
Market Snapshot 2 October 2013
Commodities
South Asia Last
Gold Crude oil Wheat Corn Soybean Sugar Coffee
1287.54 102.04 681.25 439.00 1268.00 488.70 114.10
O/N Change (%) -3.12 -0.28 0.41 -0.57 -1.15 0.53 0.35
52-week High 1796.08 112.24 916.50 800.00 1630.00 582.50 200.00
52-week Low 1180.57 84.05 623.00 440.25 1271.00 456.70 113.50
India markets rose after falling for two straight sessions, helped by investors bargain-hunting among bank stocks. The rupee’s slight recovery against the nd USD helped despite India’s manufacturing output falling for a 2 straight month in September. The report said new orders fell as the HSBC PMI Index was at 49.6 from August’s 48.5 mark. Both were below the 50 threshold for expansion.
Fixed Income
490
Benchmark US 10-year notes fell in the belief that the partial US government shutdown will be brief. The note’s yield rose to 2.65%. The shutdown itself isn’t a trigger for US government bonds yet, but if US President Barack Obama chooses to default or does not have the ability to pay interest when the debt ceiling is hit, the credibility and the idea of US notes as the ultimate safehaven play will be hit.
480
Commodities
Commodities Research Bureau (CRB) Index
Crude oil futures fell as traders worried a partial standoff in Washington would crimp fuel demand. Oil on the Nymex plunged but recovered some of its losses as traders exited some bearish positions.
470
Gold on the Comex fell as investors left bullion behind in betting the partial US government shutdown will be shortlived. Gold is down 23% this year, and is heading for its first yearly loss since 2000. Sep-13
Aug-13
Jul-13
Jun-13
May-13
Apr-13
460
Sources: Bloomberg, DBS Group Research and Vickers (DBS), Dow Jones Newswires, Reuters
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 Japan: Main Challenge Lies in Imported Inflation Growth seems to have slowed from the peak of 4Q in 1H-13, but remains above the long-term trend rate of 1%. Recovery in the manufacturing sector has continued, driven by rising exports as a result of a cheaper Japanese yen and improving demand from China.
Tankan Survey Turned More Positive 40
20
Although industrial production slipped 0.7% on-month, seasonally adjusted in August, manufacturers’ production forecast for the September-October period remained significantly positive. Manufacturing PMI has stayed above 50 for the seventh straight month in September. The recent Tankan survey also showed business sentiment has turned more positive in 3Q-13.
0 -20 -40 -60
-80 Dec-03
Tankan Business Conditions Large Enterprises Mfg
Aug-05
Apr-07
Dec-08
Source: Bloomberg, as of 1 October 2013
Aug-10
Apr-12
Meanwhile, the construction sector is faring well. Construction orders have maintained a steady uptrend in August, partially driven by the increase in public investment spending. The private housing market has also exhibited signs of a modest pickup, as reflected in the rise of condominium sales and mortgage loans. This was due to low interest rates, higher inflation expectations and the frontloading of property buying ahead of next year’s consumption tax hike.
For now, a main challenge to the economy is the rise in imported inflation as a result of yen depreciation, which occurs at a time when wage growth has remained sluggish. The shrinking of real household incomes helps to explain the slide in consumer confidence and retail sales in 3Q-13. That said, with fiscal policy expected to remain supportive for an extended period, a drastic slowdown in private consumption would be avoided. Source report: DBS Group Research. Daily Breakfast Spread. 1 October 2013. (Summarised by DBS Group Wealth Management /CIO Office.)
Market Snapshot 2 October 2013
FX Pulse Currencies
FX Round-up O/N Change (%) -0.01 -0.27 0.87 -0.29 0.06 -0.32 0.01 -0.86 0.56 -0.59 -0.26 1.14 -0.32 -0.05
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
1.3526 98.00 0.9398 0.8276 1.6195 1.2518 6.1216 1.4392 1.1765 1.0360 2.0273 1.1355 1.6932 0.8352
O/N High 1.3588 98.73 0.9435 0.8342 1.6260 1.2564 6.1256 1.4553 1.1807 1.0440 2.0371 1.1378 1.7007 0.8367
O/N Low 1.3517 97.66 0.9289 0.8248 1.6182 1.2506 6.1178 1.4359 1.1661 1.0326 2.0264 1.1219 1.6919 0.8333
AUDSGD
GBPSGD
CNYSGD
The Indonesian rupiah rose after the government said the trade balance swung to a surplus in August from a record deficit in July. A healthier trade balance should help the rupiah remove one of the key factors in its recent dive against the USD. Imports fell by 13%, the government said. The government said Indonesia’s trade surplus stood at USD130 million in August, from a record USD2.3 billion deficit the previous month. The euro was slightly higher ahead of the European Central Bank meeting later today. ECB President Mario Draghi is likely to keep the benchmark refinancing rate at a record low 0.5% and say the central bank is prepared to look into more long-term refinancing options for banks. Sources: Bloomberg News, Dow Jones Newswires, Reuters.
SGD VERSUS MAJOR CURRENCIES USDSGD
The US dollar slid as many US government services grinded to a halt overnight. The news means that there is a possibility the US Federal Reserve will extend or look to 2014 before it begins curbing its easy money programme, now at USD85 billion a month, and one of the key reasons for the USD’s weakening.
NZDSGD
104 99 94 89
Sep-13
Aug-13
Jul-13
Jun-13
May-13
May-13
Apr-13
84
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
1.3460
1.3335
1.3588
1.3711
GBP/USD
Bullish
1.6080
1.5952
1.6260
1.6380
USD/JPY
Range
96.83
95.79
99.13
100.60
AUD/USD
Bullish
0.9288
0.9205
0.9460
0.9528
NZD/USD
Bullish
0.8215
0.8136
0.8341
0.8435
USD/CAD
Bearish
1.0272
1.0179
1.0357
1.0468
USD/SGD
Bearish
1.2493
1.2416
1.2581
1.2712
AUD/SGD
Bullish
1.1654
1.1416
1.1880
1.1960
NZD/SGD
Bullish
1.0302
1.0200
1.0438
1.0503
GBP/SGD
Bullish
2.0150
1.9950
2.0400
2.0678
EUR/SGD
Range
1.6853
1.6720
1.7016
1.7205
EUR/AUD
Range
1.4186
1.3950
1.4558
1.4697
AUD/NZD
Bearish
1.1290
1.1185
1.1432
1.1553
XAU/USD
Range
1272
1235
1307
1343
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 2 October 2013
Economic Calendar – 02 October 2013 Country
Event
Period
Survey
Actual
Prior
Focus
US
ADP Employment Change
Sep
176K
--
176K
SI
Purchasing Managers Index
Sep
50.5
--
50.5
Singapore’s manufacturing activity is expected to remain in growth territory in September.
Source: Bloomberg
Bond risk rating changes Effective
Bond Name
Issuer
23/09/2013
RABOBK 4 1/8 09/19/18
23/09/2013
Risk rating
Reason
New
Existing
RABOBANK NEDERLAND AU
1
2
Tenor reduction
NAB 5 09/20/18
NATIONAL AUSTRALIA BANK
1
2
Tenor reduction
23/09/2013
BOIIN 3 5/8 09/21/18
BANK OF INDIA LONDON
3
4
Tenor reduction
25/09/2013
PROMBK 10.2 11/06/19
PROMSVYAZBK(PSB FINANCE)
5
4
Moody's downgraded the paper credit rating from Ba3 to B1
Information updated as of 27 September 2013.
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