MARKETS INSIGHTS

Miss in US job data could spell relief for traders

Telco shares such as Singtel, StarHub and M1 were hit last week. This came as three companies - MyRepublic, airYotta and TPG Telecom - submitted bids for the licence to be Singapore's fourth mobile phone operator.
Telco shares such as Singtel, StarHub and M1 were hit last week. This came as three companies - MyRepublic, airYotta and TPG Telecom - submitted bids for the licence to be Singapore's fourth mobile phone operator. PHOTO: REUTERS

Less likelihood of a Sept Fed hike; Asian markets could ride on US, European stocks

A miss in the tightly-watched jobs data report in the United States has softened expectations for a September rate hike, which could spell a spot of relief for traders this week.

Wall Street advanced last Friday as non-farm payroll data showed the number of jobs added in August were fewer than expected, while still indicating that the labour market is growing steadily. The Dow Jones Industrial Average rose 0.36 per cent while the S&P 500 put on 0.42 per cent. The US markets are closed today for a holiday.

"That the US stock markets rose is an indication the non-farm payroll numbers, while under-whelming, is not weak enough to be concerning," IG market strategist Bernard Aw told The Straits Times. "What it does seem to show is that the likelihood of a September Fed hike is dramatically lowered. Investors believed that this will support equities." He added that Asian markets, including Singapore, could ride on the upwave from US and European stocks this week, "although we are unlikely to see a strong bullish response".

Traders will be on the lookout for a slew of central bank activity this week, set to follow the Group of 20 summit in China, which ends today.

Bank of England governor Mark Carney is slated to give a testimony before British Parliament on Wednesday, during which details on the central bank's measures following the Brexit vote may emerge.

US Federal Reserve officials John Williams and Eric Rosengren will be speaking tomorrow and on Friday respectively, while the Beige Book, a report on the economic conditions of country's districts, will be published mid-week - all these could offer more clues to the timing of the next rate hike.

A number of economic reports will also help provide direction for markets. Australia is set to release second-quarter gross domestic product figures on Wednesday, while Japan will announce its numbers the day after. China is also reporting its August trade figures, inflation numbers and foreign direct investment data from Thursday.

The Singapore market completed a week-long losing streak last Friday, with the Straits Times Index down 53.73 points or 1.88 per cent for the week to 2,803.92, amid lacklustre volumes. The daily average volume of STI shares traded last week was 198 million against a daily average of 258 million year to date, Bloomberg data showed.

Among the stocks in play last week were Singtel, which lost 8.3 per cent during the week to $3.87, and StarHub and M1, which lost 7 per cent and 6.7 per cent, respectively. This came as three companies - MyRepublic, airYotta and TPG Telecom - submitted bids for the licence to be Singapore's fourth mobile phone operator last Friday.

Travel and tourism-related stocks took a hit in the light of fears over the Zika virus outbreak. Singapore Airlines, for instance, slid 1 per cent in the week to $10.61.

Sembcorp Marine, which will be dropped from the STI from Sept 19 and replaced by Jardine Matheson Holdings, sank 6.5 per cent to $1.23.

Mr Andrew Gillan, head of Asia ex-Japan equities at Henderson Global Investors, noted that an obstacle facing the market is that it continues to be fairly narrow in terms of sector exposure among large caps, which are dominated by banks and, to a lesser extent, telcos, property and offshore and marine. "If we look at all of these sectors, it is fair to say that growth is challenged, given the lack of growth globally, in addition to more specific challenges facing the oil and gas industry."

He said he remains cautious on banks, which could see challenges in their revenue growth amid a risk of increased provisions for loans to some sectors, particularly those related to oil and gas. DBS Group Holdings, for instance, was down 0.5 per cent for the week to $15.03.

A version of this article appeared in the print edition of The Straits Times on September 05, 2016, with the headline 'Miss in US job data could spell relief for traders'. Print Edition | Subscribe