5 things to know before the Singapore market opens this week: Nov 2-8

Pedestrians walking past buildings illuminated at night in the Lujiazui district of Shanghai, China.
Pedestrians walking past buildings illuminated at night in the Lujiazui district of Shanghai, China. PHOTO: BLOOMBERG

1. Fresh worries about China's economy

New official data out on Sunday (Nov 1) showed that activity in China's factories unexpectedly shrank in October, raising fresh concerns about the health of the mainland's economy.

The fall in the purchasing managers' index to 49.8 comes despite a slew of stimulus measures including a move on Oct 23 to cut interest rates for the sixth time since November last year and various other attempts by Beijing to spur growth.

A PMI reading below 50 indicates the industrial sector is contracting.

Other data out last week showed China's economy grew 6.9 per cent in the third quarter, from July to September, the first time the rate has dipped below the 7 per cent mark since the global financial crisis.

2. US jobs data on Friday could be key to interest rate rise timing

United States employment data due out on Friday (Nov 6) could hold the key to whether the Federal Reserve raises the benchmark interest rate this year - or holds fire until next year.

The Fed's most recent signals suggest a December rate rise is on the cards, but analysts say very weak employment figures could cause a re-think.

The jobs numbers are regarded as an important indicator of the health of the world's largest economy, where interest rates have been held near zero for nearly a decade in efforts to get investment moving.

Analysts polled by Reuters expect US employers outside the agricultural sector to have added 180,000 jobs in October and overall earnings to have increased by 0.2 per cent during the month. "If we get 175,000 or 180,000 (new jobs) and wages up three-tenths of a per cent, that significantly increases the probability that the Fed will raise rates in December," said Mr Mickey Levy, an analyst at Berenberg in New York.

HSBC economists also said that average job gains above 150,000 a month in October and November may be enough to keep a December rate hike on the table for most members of the Fed's Federal Open Market Committee.

Financial markets are pricing in a 50 per cent probability that the Fed will increase its main interest rate to 0.25 per cent or even 0.50 per cent from the current 0.125 per cent on Dec 16, according to data compiled by CME group.

3. Analysts split over possible Australian rate cut

The betting is more or less even on whether the Reserve Bank of Australia will cut the official interest rate from 2 per cent at its meeting on Tuesday (Nov 3).

The RBA has been trying to balance efforts to get the sluggish Australian economy moving again with concerns that the housing market, especially in Sydney and Melbourne, has become overheated. Lower rates may spur even heavier investment in real estate.

The Sydney Morning Herald reported that interest rate swaps indicate there is a 44 per cent chance the RBA will cut rates by another quarter of a percentage point to 1.75 per cent at its Tuesday meeting.

However, many Australians will be focused on betting of a different type on Tuesday, with the running of the Melbourne Cup horse race.

In the northern hemisphere, Reuters reports that the Bank of England is forecast to hold interest rates steady on Thursday, with just one member of its monetary policy committee seen voting for raising the main rate from the current 0.5 per cent.

The BoE is also expected to cut its growth and inflation projections. Britain's economic recovery slowed more than expected in the three months to September after a slump in construction, suggesting more than two years of relatively rapid economic growth may be coming to an end.

A Reuters poll published before the latest British economic growth data found the BoE was not expected to raise rates until the second quarter of next year and, in any case, not before the Fed.

4. DBS Group Holdings to report third quarter results

The latest big blue chip to report its third quarter results in Singapore is DBS Group Holdings, with an announcement due before trading opens on the Singapore Exchange on Monday (Nov 2).

DBS will be the third of the three local banks to unveil its latest report card.

Last week, both OCBC Bank and United Overseas Bank announced their third-quarter results, which showed their otherwise stable core earnings eroded by market disruptions in recent months.

In a worrying sign, loans growth continued to slow and non-performing loans worsened, pointing to financial difficulties across the broader corporate sector.

5. Singapore industrial index to offer new clues on local manufacturing

A closely-watched gauge of Singapore manufacturing to be released on Tuesday will offer fresh clues on the state of the local industrial sector.

Data out in October showed that factory output shrank in September for the eighth straight month.

Factory output shrank a worse-than-expected 4.8 per cent in September from the same month a year earlier as sluggish global demand took a continuing toll on the Republic export-reliant economy.

On Tuesday, the Purchasing Managers' Index for October will be released by Sipmm, based on a survey of factory purchasing managers.

The PMI for September came in at 48.6, the third straight month of contraction. Any reading below 50 indicates the sector is shrinking.