SINGAPORE – Singapore stocks rose on Friday in tandem with other Asian markets following one of the strongest overnight market rallies in over two years on Wall Street, prompted by lower-than-expected US inflation numbers and a softening job market.
The benchmark Straits Times Index was up 1.7 per cent on Friday at 3,228.33 points – its highest level since mid-September – supported by bank and property stocks. Singapore real estate investment trusts, or S-Reits, were broadly higher on expectations that inflation was being controlled and the US interest rates cycle could ease in the next few months.
Across the region, Japan’s Nikkei 225 rallied 2.98 per cent, while Hong Kong’s Hang Seng gained a solid 7.74 per cent. South Korea’s Kospi was up about 3.37 per cent. In China, the Shanghai SSE Composite index was up 1.69 per cent, while Shenzhen’s Component index gained 2.12 per cent.
This comes after Wall Street stocks put on their strongest showing in 2½ years on Thursday. The Dow Jones index climbed 3.7 per cent, or 1,201.43 points, to 33,715.37, while the broader S&P 500 index made an even more impressive gain as it surged 5.5 per cent, or 207.8 points, to 3,956.37. The tech-heavy Nasdaq, which has been severely beaten down this year, surged 7.35 per cent, or 760.97 points, to 11,114.15.
The United States’ October inflation print boosted the market – the consumer price index (CPI) gained just 0.4 per cent for the month to 7.7 per cent year on year. This was the lowest rise in inflation numbers this year, and significantly below the 8.2 per cent of the previous month.
Core inflation, which excludes food and energy costs, rose by a lower-than-expected 0.3 per cent on the month and 6.3 per cent on an annual basis.
Meanwhile, US jobless claims rose by 7,000 to 225,000, their highest level for the week ended Nov 5. Last week, October unemployment rose to 3.7 per cent from 3.5 per cent a month earlier.
The fall in inflation numbers triggered a dive in 10-year US Treasury yield to 3.81 per cent, its lowest in months. The two-year Treasury bill was down 30 basis points to 4.32 per cent. But the US dollar index fell 2 per cent to 108 levels, its sharpest single session decline since 2009. Oil prices, however, firmed up slightly as fears of a US recession eased slightly.
The unexpected softening in the latest CPI numbers has raised hopes that the US Federal Reserve will pivot away from its hawkish stance on rates, which has seen its key Fed funds rate hiked six times this year, including four increases of 75 basis points. Markets are now pricing an 85 per cent likelihood that the Fed will hike up its key rate by 50 basis points next month.
But Fed officials, while welcoming the lower inflation numbers, cautioned against getting too excited by just one set of inflation numbers. San Francisco Fed chief Mary Daly said this was “far from a victory”, while Dallas Fed president Lorie Logan called the CPI report a “welcome relief” but added that more rate hikes could be in the offing, albeit at a slower pace.
Analysts urged caution as the market was likely to remain volatile despite the rally. “Do use this rally to reposition and rebalance your portfolio because in 2023, we will face recessionary conditions,” said Mr Kelvin Tay, UBS’ chief investment officer for Asia-Pacific.
The Fed funds rate is now at 3.75 per cent, but most economists expect at least a hike of 100 basis points between December and February to lift it to just under 5 per cent.
