Nasdaq tumbled over 4% last night, extending the losses since last week as trade risks, protectionism and rising treasury yields started to shake the rich-valued American shares.

President Trump blamed the rout to rate hikes, saying “The Fed is making a mistake. They’re so tight. I think Fed has gone crazy”. Indeed, the 10-Year US Treasury Yield has surged to multi-year high of 3.22% last week following Fed’s decision to raise the policy rate to 2.00-2.25% in Sep meeting. Nervousness arose from the gradual rise in borrowing cost has finally spiralled into a meaningful correction in the equity market, and this may result in more profit-taking activities in the days to come. The fundamental elements, however, remain solid for US market, and there has yet to be any sign of recession albeit rising trade frictions and protectionism. Therefore, this looks more like a natural market correction at this moment.

Dow and S&P 500 were pulled down too, breaking down their upward channel that formed since April this year. Technically, the Dow has come to 50% Fibonacci Retracement level of 25,400 area last night, with immediate support and resistance levels found at around 25,060 and 25,700 area respectively. Trend has turned bearish, as both of its SuperTrend (10,3) and 10-Day SMA flipped downwards. Momentum indicator RSI has dived into lower bound of 23.6%, suggesting the market has been temporarily oversold.

Asian stock markets are of no exception. Singapore’s Straits Times opened 2% lower to 3,061 points, breaking down a key support level of 3,100 points. MSCI Asia Pacific index lost 1.8% early this morning. The Straits Times Index has fallen over 6% to 3,060 area from recent high of 3,264 saw earlier last week. Meanwhile, market participants are waiting for MAS bi-annual policy announcement to paint a clearer picture of policy outlook. Bloomberg consensus showing that 12 out of 21 surveyed economists see a tightening move by MAS this time, leaving no clear direction of what is expected to happen later this week.

Malaysia’s KLCI tumbled 2.3% yesterday as stock market reacted negatively to a recent government message to introduce new taxes to tackle debt and shore up budget deficits. Investors probably tried to hold cash and stay on the side-line ahead of next week’s Malaysia Plan mid-term review and Budget 2019, due to rising political uncertainties. In the Bursa Malaysia exchange, blue chip company Asiata, Telekom Malaysia and Genting were leading the decline in the benchmark index. Negative sentiment has spread over to Singapore due to the two country’s close connection in business activities.

US 30 - Cash

By Margaret Yang in Singapore

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