Markets Insights

Market volatility expected to continue this week

The Yangshan Free Trade Port in Shanghai, China. Trade tensions between China and the US escalated last week, with Beijing readying tariffs on 128 products imported from the US, hours after US President Donald Trump announced plans to impose tariffs
The Yangshan Free Trade Port in Shanghai, China. Trade tensions between China and the US escalated last week, with Beijing readying tariffs on 128 products imported from the US, hours after US President Donald Trump announced plans to impose tariffs on up to US$60 billion of imports from China.PHOTO: BLOOMBERG

It remains to be seen if US is heading towards brink of trade war with China, says analyst

Volatility in trading - not just in Singapore but globally - is expected to continue this week, after major US benchmarks last Friday got walloped hard over the potential United States trade war with China.

Both the S&P 500 and Dow Jones Industrial Average moved into the red for the year. The Dow fell 1.77 per cent to 23,533.2, while the S&P 500 lost 2.1 per cent to 2,588.26 - close to its February low.

Bloomberg also reported that the CBOE Volatility Index, a key measure of market expectations of near-term volatility, jumped nearly 7 per cent to the highest level since early this month. Expectations seem to be for stock market volatility to continue as trade concerns linger.

The benchmark Straits Times Index shed 2.6 per cent last week to finish at 3,421.39, with the greatest drop incurred last Friday after China hit back at US President Donald Trump's tariff plans by announcing US$3 billion (S$4 billion) in reciprocal tariffs.

IG Markets market strategist Pan Jingyi said: "The two key events of last week, the Federal Open Market Committee meeting and trade tariff announcements, took the markets for a ride."

She now expects the market to retain its focus on the trade theme in the last week of this month, which will be cut short by the Good Friday public holiday that affects stock markets in Australia, Hong Kong, London, Singapore and the US.

VOLATILE WEEK

The two key events of last week, the Federal Open Market Committee meeting and trade tariff announcements, took the markets for a ride.

IG MARKETS MARKET STRATEGIST PAN JINGYI, who expects the market to retain its focus on the trade theme this week.

Ms Pan said: "Whether this indeed is the US heading into the brink of a trade war with China, it does remain to be seen. Certainly, both parties previously reckoned that there will be damages. However the concern is that the Trump administration appears to regard a trade war as one that is 'easy to win' and China is 'not afraid' of engaging in one."

Another clue that more pullbacks lie ahead in equity markets? US futures in "a sea of red" at her time of writing on Friday evening, she said.

"Among sectors, anticipation for tech goods to be affected had inflicted pain upon the said sector across the Asian region. Investors are likely awaiting further clarity on the complete list of items targeted by the US, with the list due to be out in 15 days.

"The expectation is that matters will worsen with the actual implementation of tariffs that would induce tit-for-tat moves. Any conciliatory remarks from either parties would be a much-needed short-term painkiller, one to watch next week."

This week offers a trickle of data indicators to follow in the US, including March's conference board consumer confidence index, the final reading of Q4 gross domestic product (GDP), and core personal consumption expenditure figures, which will help investors assess the economy.

In Asia, the central bank of Thailand meets on Wednesday, with the market expecting no changes in monetary policy.

Other data releases include South Korea's final Q4 GDP data, as well as Japan's retail sales, unemployment and industrial production figures. Singapore will also release its February industrial production numbers today.

A version of this article appeared in the print edition of The Straits Times on March 26, 2018, with the headline 'Market volatility expected to continue this week'. Print Edition | Subscribe