Markets Insight

Oil surges past US$60 a barrel

It's been a good year to hold equities. Stock indices have steadily punched through to fresh highs this year, and so it was in the past week.

Here and in the United States, a spate of positive earnings surprises - coupled with robust economic data that has assured investors that already high stock valuations can continue to be supported - have helped extend the bull run.

The Straits Times Index (STI) finished last Friday on a fresh two-year high, closing 45.71 points or 1.4 per cent higher than the week before.

The Nasdaq was up 1.1 per cent for the week and the S&P 500 closed 0.2 per cent higher over the weekend after investors reacted to strong earnings reports by Intel, Microsoft, Amazon and Google which were made after Thursday's closing bell.

IG market strategist Jingyi Pan said that this week will continue to be a corporate earnings-led one, with 26 per cent of the companies on the S&P 500 index reporting their results.

"It would likely be a telling week for the third-quarter earnings season as three-fourths of the companies on the comprehensive S&P 500 index would have delivered their results by the end of the week. Mixed performances relative to the previous season have been seen thus far with earnings outperforming in percentage terms while sales lagged behind," she said.

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  • A fresh two-year high for The Straits Times Index (STI) on Friday, closing 45.71 points or 1.4 per cent higher than the week before.

In Singapore, market attention will fall on United Overseas Bank, the second of the three big banks to announce earnings before trading hours on Friday.

Asian markets will also await a fresh slate of Purchasing Managers Index (PMI) data which is used to gauge the strength of manufacturing activity in each country.

Notably, Apple shares rose last week after the tech giant said that demand for its new and most expensive iPhone X, which will be released on Friday, is "off the charts", though supply will be limited as well.

The oil price outlook is also finally stabilising after a three-year downturn, with benchmark Brent crude jumping about 2 per cent last Friday to rise above US$60 a barrel - a level not seen since July 2015.

This came on the back of a weaker greenback but more importantly, Saudi Arabia and Russia have declared their support for extending a deal between the Organisation of the Petroleum Exporting Countries and other producers to cut output for another nine months after the present pact expires in March.

Keppel Corp and Sembcorp Marine have also seen a renewal in investor interest in the last few weeks. SembMarine reports earnings on Tuesday after market close.

This week also marks a number of central bank meetings, including those of the Bank of Japan, the US Federal Reserve and Bank of England.

The expectation is for the Fed to stand pat on interest rates for now and do a small rate hike in December.

US president Donald Trump will also announce his choice of a new Fed chairman this week.

DBS Group Research said in a weekly wrap: "Clearly the choice of a dovish head would support market sentiments going in to the year's end. But we doubt if the credential of the Fed chair would dominate the central bank's actions over the coming years, especially if macro developments remain as benign as we expect.

"The Fed, regardless of the composition of its leadership, will likely pursue a policy of gradual tightening."

A version of this article appeared in the print edition of The Straits Times on October 30, 2017, with the headline 'Oil surges past US$60 a barrel'. Print Edition | Subscribe