Markets Insights

Markets wait on trade talk, Fed minutes

Container ships at the Pasir Panjang terminal port. Trade-dependent Singapore's non-oil domestic export and balance of trade numbers are due early today, and will offer insight into how heavily trade tensions are impacting the local economy.
Container ships at the Pasir Panjang terminal port. Trade-dependent Singapore's non-oil domestic export and balance of trade numbers are due early today, and will offer insight into how heavily trade tensions are impacting the local economy.PHOTO: AGENCE FRANCE-PRESSE

Also in the spotlight: Budget 2019 speech and Nodx figures, both to be out today

Investors will have plenty to think about this week, with new developments expected on both the local and international fronts.

In Singapore, Finance Minister Heng Swee Keat will deliver the highly anticipated Budget 2019 speech this afternoon.

Analysts are expecting an expansionary Budget, given a projected surplus for financial year 2018 and the possibility of a general election in the near term.

Non-oil domestic export (Nodx) and balance of trade numbers are due early today, and will offer insight into how heavily trade tensions are impacting the local economy.

According to Bloomberg estimates, Nodx figures are expected to improve to 6.3 per cent month on month or 1.8 per cent year on year, from declines of 5.7 per cent month on month and 8.5 per cent year on year in December.

"Appetite towards the Singapore dollar will most likely receive a boost if trade figures surprise to the upside," said FXTM research analyst Lukman Otunuga. "However, we still see the local currency's trajectory driven by trade developments and the US dollar's performance."

  • 6.3%

    Expected non-oil domestic export figures, an improvement month on month from a decline of 5.7 per cent month on month in December.

The United States and China will continue trade talks in Washington this week, after both sides said they were making progress in their Beijing discussions. At a Friday meeting with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, Chinese President Xi Jinping said the week of talks had produced "step-by-step" progress.

Meanwhile, US President Donald Trump told a White House news conference also on Friday that the US was closer to striking a deal with China, although he added that talks remain complicated. He confirmed that he will consider extending the March 1 deadline if the two sides are close to a deal, or headed in the right direction. UOB's Global Economics and Markets Research team maintains its base case projection of 65 per cent for the extension, and believes it could be postponed by one to three months for negotiations to continue.

"Along the way, the US and Chinese officials may announce some achievements (like China buying more US goods), but a more comprehensive trade deal may not materialise until the second half of 2019, which may mean a further extension," the team said.

Key US indices rose on the optimism, with the Dow Jones Industrial Average gaining 1.74 per cent on Friday. The S&P 500 added 1.09 per cent and the Nasdaq Composite advanced 0.61 per cent.

Investors will scrutinise the January meeting minutes of the US Federal Open Market Committee (FOMC) for rate hike indications when they are released on Thursday morning.

Mr Evan Brown, head of macro asset allocation strategy at UBS Wealth Management, said the statement and press conference at January's FOMC meeting confirmed that the Fed is not committed to any further hikes for this cycle.

The Fed pause raises the probability that the US' historically long expansion will last even longer, he added.

IG Markets analyst Pan Jingyi said: "As far as the market is suggesting, the Fed's patient stance is expected to remain in the first half of 2019 but a halt to the balance sheet run-off as early as this year could help to support equity markets."

This week's data calendar is light, with Thailand reporting fourth-quarter 2018 gross domestic product numbers today and Australia unveiling its January employment report on Thursday.

Several of the Straits Times Index's heavyweights will report earnings this week, led by DBS today and ending with OCBC Bank and United Overseas Bank on Friday.

CapitaLand results are expected on Wednesday, while a handful more, including Genting Singapore, ST Engineering and Wilmar International, are due on Thursday.

A version of this article appeared in the print edition of The Straits Times on February 18, 2019, with the headline 'Markets wait on trade talk, Fed minutes'. Print Edition | Subscribe