US markets stopped bleeding after a two-day selloff following US president Donald Trump’s State of the Union address, in which he plotted a bright picture of the country’s outlook and called for $1.5 trillion infrastructure plan.
The speech was very much ‘America-centric’ and offers few specifics about foreign policy and trade protectionism, therefore, it provided a sense of relief to the market. The dollar slipped after Trump’s speech and Asia’s emerging currencies rose.
Market confidence was lifted by strong ADP private payrolls reading, which came to be 234k, higher than consensus forecast of 185k. The US commercial crude oil inventory climbed 6.77 million per barrel last week, according to DoE report, substantially higher than market forecast of 0.5 million barrels. Brent oil prices surged by around 1.5% overnight, suggesting market is ignoring the fact of stockpile build-up but choose to focus on US infrastructure project.
The FOMC held its policy rate unchanged at 1.25% to 1.5% last night – a decision that was very much anticipated. The central bank also gave an upbeat assessment of the fundamental outlook and stressed further rate hikes lie ahead. The likelihood of a March rate hike, according to CME’s FedWatch tool, is ow standing at 83.1%, up from 70.9% a day before.
The central bank acknowledged solid gains in employment, household spending and fixed investment, and upgraded its near-term outlook for inflation. A hawkish-biased statement failed to lift the US dollar however. The US dollar index has been consolidating at around 89.0 area but the overall trend remains bearish. Technically, its 10-Day SMA and SuperTrend (10,2) are both sloped downwards, suggesting selling pressure persists unless we see a strong rebound in its price to bring 10-Day SMA upwards.
US Dollar Index chart – March 2018
The Hong Kong market finished on a strong foot yesterday as investors are taking advantage of a technical correction to ‘buy on dips’. The Hang Seng Index rebounded 0.8%, pausing a two-day technical correction. In China A-share market, blue chip companies outshined small and mid-cap stocks with over 1000 stocks in the Shanghai Stock exchange finishing in negative territory. The China A50 index surged over 2% despite the fact Shanghai Composite ended 0.21% lower. This suggests large-cap stocks are still preferred by investors and money managers due to certainties in their earnings amid an upswing economic cycle.
In Singapore, the Straits Times Index opened 8 points or 0.25% higher today on improved market sentiment as well as higher crude prices. Panic selling is likely to fade and investors may seize this technical correction as a good opportunity to buy on dips. Big earnings are coming on the way, with SIA, DBS, SingTel, SAS and HPH announcing their 4Q results by end of next week.
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