European and US markets closed lower on Monday, as US president Donald Trump announced the official withdrawal from the lengthy negotiated Trans-Pacific Partnership.
That was, however, not a surprise to everyone as it was widely anticipated after the Nov election.
What truly concerns the market is his attempt to re-negotiate NAFTA with Mexican and Canadian leaders, signaling that the new administration will put trade protectionism at the top of their to-do list. The new government also threatened to punish US companies for moving factories overseas, which could hurt export-oriented emerging economics like Mexico, China, Thailand, Vietnam etc.
The US dollar Index slumped over 0.8% to a two-month low of 99.9 last night before bouncing back to the 100.1 area this morning. The rising uncertainty surrounding free trade has started to send some capital flowing back into safe havens like gold and the Japanese yen. Gold extended gains to its highest level in over two months to $1,217 this morning, fueled by both demand for safety and a weaker dollar.
Singapore’s Straits Timex Index extends its fourth consecutive session of gains to 3,030 points this morning. With a year-to-date gain of 5.18%, Singapore is the best-performing market in Asia so far this year. Better-than-expected corporate earnings and a rebound in crude oil prices could be the main driver behind this rally. Relatively low valuations and high dividend yields also make local stocks more attractive to investors.
Technically, the next resistance for STI is around 3,035 (50% Fibonacci Retracement) and the psychological level of 3,000 remains its immediate support level.
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