Crude slump drags on energy sector

Crude oil prices fell sharply on Monday, entering into a “technical bear” market after falling over 20% from June’s high. US equity markets retraced from historical highs due to a slump in oil prices. Energy was the worst performing sector, down 3.3%. Crude oil prices will continue to weigh on stocks, especially on Singapore’s oil & gas and banking names. 

Swiber’s wind up petition, although withdrawn over the weekend, kick started a “domino effect” in Singapore’s equity and bond markets. Volatility continued to spread out as O&G sectors continued to slump and banks were sold badly. DBS is getting hurt the most among local banks, with over S$700 million exposure to Swiber group. 

Some other smaller oil & gas service providers namely Ezra and Ezion were also being sold heavily on worries about a possible contagion effect.

RBA rate decision to be watched

The Reserve Bank of Australia (RBA) will announce its interest rate decision at 12:30pm Singapore time today. The future and options market indicates a 75% probability of a 25bps rate cut by the RBA according to Bloomberg’s world interest rate probability forecast. AUD is trading lower this morning at 0.7540 against the USD. 

A rate cut will probably weigh on AUD and send Australian stocks higher, whereas a decision to stand pat will probably do the reverse. 

Details of Japan’s 28 trillion stimulus package to be announced

Last Friday, the BOJ disappointed the market again by keeping interest rates unchanged at negative 0.1 % and maintained the monetary base at 80 trillion yen, which is far below the market’s expectation. USD/JPY tumbled as much as 300 pips following the announcement. 

Today Japan’s government is set to announce details of its 28 trillion yen stimulus package, which is set to battle against a strengthening yen and weak consumer spending. Only about a quarter of the package is on actual spending, whereas the remaining three quarters will be in the form of loans and other financing, over several years. 

Crude Oil West Texas Sep 2016

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