Asian markets posit to rebound from Monday’s losses, fuelled by positive sentiment from the US markets overnight. The three major US indices rallied on Monday, led by information technology (+1.35%), consumer discretionary (+1.26%) real estate (+1.23%) and communications (+0.83%). Energy (-0.81%) was the only sector that closed lower last night, as crude oil prices continued to slide on Russia’s reluctant cut to output.
Economists believed that the US economy is on an upward trajectory and the coronavirus impact should be temporary. Last Friday’s January Non-farm payroll figure topped market estimation at 225k, suggesting a robust employment market amid a cyclical recovery.
Federal chairman Jerome Powell is due to deliver his semi-annual testimony to US lawmakers on Tuesday and Wednesday, in which traders will look for clues of future monetary guidance. ECB chairwoman Christine Lagarde will speak at the European Parliament on Tuesday - a key event for euro’s moment.
Brent oil prices slumped further to US$ 53.9 this morning, hitting a 13-month low, as Russia seemed to be reluctant to cut down output despite OPEC’s effort to shore up oil prices.Currently, the impact of the coronavirus on China’s economy and its energy demand has become a key driver of oil’s downturn. Since the outbreak of coronavirus on 20 Jan 2020, the Brent price has declined over 18% and is extending the downward trend.
Data from the US Energy Information Administration showed crude oil inventory rose by 3.35 million barrels last week, with the market expecting another 3 million barrels this week.
Technically, crude oil price seemed to be heavily oversold, and thus a technical rebound is likely should there be a positive catalyst such as an OPEC+ resolution, or an improvement in China’s economic condition.
Slumping crude oil prices have exerted negative impact to Singapore’s offshore and marine sector, including Sembcorp Marine, Sembcorp Industry and Keppel Corp.
In Singapore, the outbreak of coronavirus has led to diverging performances among sectors. Defensive sectors including telecommunications, medical, healthcare, consumer staples and digital services are likely to outperform due to higher demand for their goods and services. On the other hand, cyclical sectors such as retail, tourism, hospitality, aviation & transportation, commodities, and financial services are among those currently more vulnerable.
Crude oil Brent - Cash