Markets Insights

Markets likely to get lift from US job data

Bank stocks will likely be in the spotlight this week as investors eye the results of JPMorgan Chase, Citigroup and Wells Fargo, which are among US banks scheduled to report their earnings this Friday.
Bank stocks will likely be in the spotlight this week as investors eye the results of JPMorgan Chase, Citigroup and Wells Fargo, which are among US banks scheduled to report their earnings this Friday.PHOTO: REUTERS

Local Q3 earnings, China trade data, Fed meeting and bank stocks in focus in the week ahead

Markets across Asia, including Singapore, this week are likely to lift off on Wall Street's rally after an unexpectedly robust United States jobs report on Friday.

Investors will be watching for advance estimates of Singapore's second-quarter economic growth, slated for release on Friday.

"A mild acceleration has been penned in for year-on-year growth at 2.8 per cent, while quarterly GDP is expected to revert to growth," IG market strategist Pan Jingyi said.

The local corporate earnings season for the third quarter kicks off this week with Singapore Press Holdings posting its results for the quarter ended May 31 on Friday.

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China will be releasing its import and export trade data on Thursday which, if positive, could give markets a boost.

The Singapore market is expected to start the week on a positive note after the Dow Jones Industrial Average rose 0.44 per cent last Friday and the Nasdaq outperformed, advancing 1.04 per cent. New data showed the US economy added 222,000 jobs last month, far higher than forecasts of 179,000.

Wage growth - seen as a measure of inflation - rose by just 0.2 per cent, less than expected. But economists believe that even with lacklustre inflation data, fundamentals remain strong and unemployment low, so that is unlikely to alter the Fed's monetary tightening plan.

Investors will likely be watching Fed chair Janet Yellen's semi-annual monetary policy report to the House Financial Services Committee on Thursday for signals on the inflation outlook and timing of the Fed's balance sheet reduction plan.

Bank stocks will likely be in the spotlight this week as investors eye the results of JPMorgan Chase, Citigroup and Wells Fargo, which are among US banks scheduled to report their earnings this Friday.

Local bank stocks enjoyed a spillover of positive sentiment on Wall Street after major US financial institutions passed the latest round of Federal Reserve stress tests late last month. The stress test results strengthened investors' confidence in the economic outlook and health of the financial system.

UOB KayHian last week said it anticipates a gradual rerating of local banks' share prices. "The normalisation of central banks' balance sheets could energise banks' share prices and lift their valuations towards and above their mid-cycle valuations," it said.

The brokerage has buy calls on DBS Group and OCBC Group, with target prices set at $25 and $13 levels respectively.

Meanwhile, Maybank Kim Eng has a positive call on Singapore property. With buy calls on City Developments and UOL Group, the brokerage said investors are hesitant to raise exposure aggressively, following the strong year-to-date rally for developer stocks.

But it still sees further upside for developer stocks and that "an impending rebound in home prices is a sector catalyst to watch".

A version of this article appeared in the print edition of The Straits Times on July 10, 2017, with the headline 'Markets likely to get lift from US job data'. Print Edition | Subscribe