Asia futures slumped alongside crude oil prices following the ECB’s announcement of a massive 750 billion euro stimulus package.

President Christine Lagarde’s comment, “There are no limits to our commitment to the euro” failed to lift sentiment. Investors are still likely to remain cautious as we may not have reached the end of this dark tunnel yet.

Dollar’s unusual strength against the backdrop of rate cuts and quantitative easing (QE), suggest the liquidity is still stretched in the dollar market. Strong USD is equity-negative and may become a problem for US economic recovery as well.

AUD/USD tumbled to 0.5659 – a level not seen since 2003 – as RBA is expected to cut the cash rate and launch its first ever QE program in response to the coronavirus pandemic.

Equity markets are facing unusual volatility with the VIX at 70+, the highest level since the 2008 Subprime crisis. When US futures hit ‘limit down’ during Asian and European trading hours (that happened four times in the past 2 weeks), the selling pressure spills over to Asia and Europe. Singapore is highly susceptible to external shock in terms of broad macro environment and stock market performance. Therefore, we may need to see the US market stop bleeding before the local market can reach a bottom.

Malaysia’s lockdown has not shown much impact on Singapore’s stock market yet. In fact, the STI went up 2% the next day following this lockdown, before it tumbled alongside with the rest of the world when the US hit ‘limit down’. The Malaysia lockdown will have some temporary impact to people who need to travel across the causeway on a regular basis. Some 300k regular travellers between the borders are impacted. The government and companies are looking for hotels and places to reside employees who can’t return to Malaysia.

The employment market is likely to get a hit and the severity will depend on how long this coronavirus pandemic is going to last. Service sectors contributes to more than 70% of Singapore’s jobs market. As Covid-19 continues, aviation, tourism, retail, F&B, hospitality and many other service sectors are at the frontline of this headwind. The employment market is likely to slow down in Q2 and it may take a longer time for jobs seekers to find a job.

US Dollar Index – Jun 2020