Markets Insights

US-North Korea tensions likely to affect sentiment

Tensions between the United States and North Korea are likely to again weigh on markets this week, with investors also eyeing minutes from the Federal Reserve and the European Central Bank.

A war of words last week between US President Donald Trump and North Korea, following the United Nations' latest sanctions to thwart the North's nuclear programme, sent the Straits Times Index (STI) down 1.4 per cent for the week.

But there could be some reprieve, following a small rebound on Wall Street last Friday. The Dow Jones Industrial Average put on 0.07 per cent last Friday after suffering the worst one-day percentage drop since mid-May last Thursday. The S&P 500 added 0.13 per cent, while the tech-heavy Nasdaq Composite Index rose 0.64 per cent.

Another source of uncertainty is likely to be comments made by Mr Trump warning that US military action is an option in Venezuela, which has been hit by economic and political strife.

Venezuela, a founding member of the Organisation of Petroleum Exporting Countries, has the world's largest proven oil reserves and is the third-biggest source of crude for the US, reported Bloomberg.

Barring any sudden escalation of geopolitical tensions, monetary policy could be a focus again as investors seek clues to inflation and the Fed's balance sheet plans from minutes to be released at 2am Singapore time on Thursday.

New York Fed president William Dudley last week reaffirmed that the central bank would like to move forward with interest rate hikes. The influential Fed official said inflation should gradually move towards its 2 per cent target and it remains on track to raise interest rates.

In Singapore, last month's non-oil domestic exports data due out on Thursday will be on traders' radar. The local economy sped up in the second quarter, with output rising 2.9 per cent year on year, higher than previously estimated, as a recovery in global trade helped to buoy manufacturing, according to data released last week.

Investors are also awaiting comments from Fed officials at their annual Jackson Hole symposium, scheduled for Aug 24 to 26.

In Singapore, last month's non-oil domestic exports data due out on Thursday will be on traders' radar. The local economy sped up in the second quarter, with output rising 2.9 per cent year on year, higher than previously estimated, as a recovery in global trade helped to buoy manufacturing, according to data released last week.

Last Friday, United Engineers (UE) posted a net profit for continuing operations of $45.3 million in the second quarter, up 303 per cent from a year ago. Last month, it became the subject of one of the biggest property takeover deals here in recent years.

A consortium led by Yanlord Land, Perennial Real Estate and its two sponsors Kuok Khoon Hong and Wilmar International and an investor bought a 33.5 per cent stake in UE at $2.60 a share, triggering a mandatory conditional offer at the same price. UE's independent financial adviser is expected to advise shareholders on the Yanlord-Perennial offer by tomorrow.

A version of this article appeared in the print edition of The Straits Times on August 14, 2017, with the headline 'US-North Korea tensions likely to affect sentiment'. Print Edition | Subscribe