The Dow Jones index tumbled 372 points or 1.78% last night, recording its largest intraday loss since November’s election.

Escalating tension in the White House caused panic selling, with President Trump trapped in multiple scandals, including apparently leaking confidential military information and alleged obstruction of justice, all of which increases the likelihood of his impeachment.

The market is now trying to unwind expectations of ‘Trumponomics’, which includes one trillion dollars of infrastructure plans, unprecedented tax reform and financial deregulation. Even if President Trump were to prise himself out of these crises, the market thinks that his ambitious reform plans will be discounted and considerably delayed. 

The Dollar Index tumbled for a fifth day to the 97.3 area, erasing the entire gains since November’s election. Volatility spiked up across equity markets overnight and the futures markets are now pointing to a lower opening across Asia-Pac. Gold and the Japanese yen rallied in investors’ pursuit of safety assets. 

‘Sell in May’ has probably kicked off, albeit a little late this year. 

Singapore NODX slumped in weaker external demand

Singapore’s non-oil domestic exports (NODX) unexpectedly dropped by 0.7% on a year-on-year basis, compared to the forecast of a 12.4% rise. The disappointing data shows weakness in external demand in non-electronic products, outweighing strength in electronic exports. 

This slowdown mainly came from the EU, Hong Kong, the US and Japan, whereas shipments to Taiwan, South Korea and China remained intact It is hard to draw any conclusion based solely on one month’s data, but the outlook over the months ahead remains something of a blur. 

Many analysts have pointed out that China has almost come to the end of an inventory build-up cycle, therefore the future demand from China is likely to remain weak. Recent US data – including housing starts, industrial production and retail sales – have also shown signs of weakness. 

The slump in NODX in April came after five consecutive months of surges in NODX since December 2016, pouring cold water on the overheated local stock market. The Straits Times Index dropped for a second consecutive day after reaching a 20-month high in mid-May. Technically, it has broken down a bullish trend, and traders ought to remain cautious in the days to come. 

The market has started to sell down since yesterday, with STI down 36 points due to profit-taking activities as well as rising political uncertainty from the US. Lots of earnings optimism has already been priced in over the last month, rendering equity markets fragile to market turbulence. They now face a technical correction.

Market Calendar – SG NODX Exports YoY

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