Markets Insight

Volatility on the cards with risk events looming

Opportunities for job-seekers at a recent event in Brooklyn. Weak jobs data in the US has largely ruled out a Fed interest rate hike this month.
Opportunities for job-seekers at a recent event in Brooklyn. Weak jobs data in the US has largely ruled out a Fed interest rate hike this month.PHOTO: BLOOMBERG

Major risk events around the world are set to take centre-stage this week, and could rock global financial markets, analysts warn.

One key focus will be the two-day Federal Open Market Committee (FOMC) June meeting in the United States. The outcome will be revealed on Thursday at 2am Singapore time.

Recent weak jobs data has largely ruled out a June interest rate hike but other nuances will be watched.

"Market participants are pricing in a zero chance, according to the Fed fund futures, and pushing out expectations towards year-end," said IG market strategist Bernard Aw. "What they will focus on is the language as well as the latest economic projections.

"As things stand, the Fed is projecting at least two rate hikes this year. Judging from recent rhetoric, they may not deviate from this. Should the rate hike path be even slower, the US dollar will doubtlessly be vulnerable to the downside."

Wall Street slipped 0.67 per cent last Friday on renewed concerns over tepid global growth.

"With the macroeconomic data mixed and the British referendum, the market continues to struggle with the overall general macro environment, not just in the US but globally," Ms Nadia Lovell, US equity strategist at JP Morgan Private Bank in New York, told Bloomberg.

The Bank of Japan's interest rate decision on Thursday could also "have an impact on live Asian trading", said Mr Nicholas Teo, trading strategist at KGI Fraser Securities.

He noted that last week's surprise move by the Bank of Korea to cut rates against expectations may influence Japan's decision.

Traders will also be keeping an eye out for "more rumblings over Brexit" in the lead-up to the referendum at the end of the month, although that "should not have too significant an impact on Singapore at this early stage", said Mr Teo.

The Singapore market, on its part, will "trade accordingly to our regionals as domestic drivers may be less evident", he said, adding that activity could pick up as Hong Kong and China resume trade after last week's Dragon Boat Festival holidays.

The Straits Times Index closed at 2,822.97 points last Friday - up 13.74 points or 0.49 per cent for the week as part of the 3 per cent gain over the past month.

Oil and gas-related counters were kept in active play as crude prices topped US$50 a barrel to their highest level this year.

Within the sector, offshore marine group Otto Marine, unchanged at 31.5 cents on Friday, announced that its executive chairman and controlling shareholder, Mr Yaw Chee Siew, has proposed a voluntary delisting offer of about $68 million.

A version of this article appeared in the print edition of The Straits Times on June 13, 2016, with the headline 'Volatility on the cards with risk events looming'. Print Edition | Subscribe