Asian equities fell on Thursday, along with treasuries and commodities.
In short, everything was falling as the fear of a June rate hike returned to the market. According to Bloomberg world interest rate probability, the implied chance of a June rate hike has climbed to 32% from 4% over the last two days.
Japan’s Nikkei 225 closed flat as JPY remained composed. The Hang Seng Index fell 0.67%, mainly weighted by the information technology sector. Tencent Holdings (700HK) fell 2.42% despite its Q1 earnings beating expectations. The company said uncertainty about China’s economic outlook may put pressure on its booming advertising business.
Singapore’s Straits Time Index lost 1.3%, with almost all sectors closing lower. Separately, Manulife US REIT is going to be listed on the SGX today. This deal offers local investors the rare exposure to the US office property market, and diversification in terms of both geographical and currency exposure. A yield projection of 6.6%-7.1% in 2016-17 is fairly attractive. The potential risks include foreign exchange risk, and limited upside from improving the occupancy rate which already stands above 96%. The success of this IPO would improve sentiment toward the IPO market in Singapore, and may attract more overseas players to look for listing opportunities on the SGX going forward.
The dollar index was little changed overnight, the dollar rally stalling slightly after a recent surge. USD/JPY is trading just below 109.85 this morning. GBP/USD reached as high as 1.4660 on strong retail sales numbers although eased backed to the 1.4590 area later in the US session. A poll on Wednesday showed 55% of respondents in favour of staying in the EU, and thus eased worries of a Brexit.
USD/SGD consolidated around 1.3780 after a recent surge on a hawkish Fed and data which showed Singapore’s April non-oil exports shrank by 7.9% year on year. EUR/USD traded sideways overnight and remains around 1.1200. CHF/GBP continued to slide, reaching close to 0.6910. The immediate support and resistance markers are at Fibonacci levels of around 0.6815 and 0.6940 respectively.
Crude oil came off from seven-month highs although pared losses later on supply disruption concerns in Nigeria and Canada. WTI crude oil futures closed at $48.16 last night. Wednesday’s US DoE report showed that oil inventories rose by 1.3 million barrels, higher than the market’s expectation of a 3 million cut. A stronger US dollar continued to extend pressure on commodities prices.
Gold and silver prices tumbled on a stronger dollar. Gold is traded at $1,255 this morning, testing a key support level near to its 50-SMA, which is currently pointing toward the $1,250 area. Silver has broken through the key support level of $16.75 and is now trading at around $16.50 this morning.
Key technical levels to watch:
- Immediate resistance levels: 1.4640, followed by 1.4887
- MACD formed bullish crossover
- MACD formed positive divergence
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