Non-Farm-Payrolls

Upbeat wage growth number and US non-farm payrolls smashed market expectations last Friday, underpinning the strength of the dollar as the Fed now has more reason to raise rates twice by year-end.

The implied probability of a September rate hike, as suggested by CME’s FedWatch tool, is now standing at 98.4%. The likelihood of a December rate hike on top of that is at 72%, up from 68.6% a day ago.

The dollar index climbed 0.4% to 95.3 area after the non-farm payrolls report, exerting pressure on metals prices. Gold slid to the 1,194 area this morning, with immediate support and resistance levels found at US$1,180 and US$1,210 area respectively.

Things are not getting better on the trade side, however, as President Trump’s plans to impose additional tariffs on US$267 billion worth of Chinese goods on top of the US$200 billion Chinese imports announced last week. Together this almost covers all imports from China in 2017. China’s central bank governor Zhou Xiaochuan said the direct impact of a trade war on the economy is limited, but the damage on market sentiment is more severe.

Meanwhile, the Naftatalks between the US and Canada stalled over the weekend, highlighting trade uncertainty ahead.

In light of the strong dollar and escalating tariffs undermining the robust jobs report, Asian investors may take a more cautious stance on risky assets. The sentiment remains bearish-biased and capital outflow is likely to continue until trade risk fades. In Singapore, the STI has broken down below a key support level at 3,200 points last week and the next support can be found at around 3,080.

Hong Kong 50 - Cash chart

By Margaret Yang in Singapore

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