The final GDP data released this morning showed that Singapore’s economy expanded 2% in 2016, driven by accelerated growth in the last quarter. The reading was higher than economists’ expectations of 1.8% and also presented an upbeat government’s forecast. 

Higher-than-expected readings were attributed to a surge from the manufacturing sector, among which the electronics and biomedical clusters were the key drivers of the economic growth.

The STI surged over 7% year-to-date, marking it as one of the best performing markets in Asia. Technically, the benchmark index has faced some resistance at 3,100 as mixed corporate earnings drew an unclear outlook of the future.  

Yet, the future outlook is clouded by rising political uncertainties and waves of anti-globalization sentiments from the US and Europe. As US reaches full employment and approaches closer to the Fed’s inflation target, a tighter Federal monetary policy is expected to lead to a stronger US dollar in the months ahead.  This might worry investors, who potentially have to confront outflows from emerging markets.

US equities saw some pullback yesterday, as investors re-assessed the “Trump optimism” and the possibility of a March rate hike. The probability of March hike slid to 36% last night from 42% a day ago, while the chance of June and July hike remained high – 76% and 80% respectively.

Gold prices rallied for a third day, challenging a key resistance level of $1,240. Silver prices also soared to a three-month high of $18.05 this morning, driven by demand for safety amid a slump in the dollar.

UOB

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