US equities ended the last trading day of the first quarter in negative territory, failing to hold up gains at market open. Bearish sentiment may have spread across Asian markets this morning, setting a soft tone for the first trading day in April.
Sector wise, energy (+1.63%) was the best-performing last night, followed by healthcare (-0.39%) and communications (-0.52%). Worst performing sectors are utilities (-4.02%), real estates (-3.26%) and financials (-2.99%).
WTI crude oil price consolidated at around $20 on Tuesday morning, as traders evaluate between bargain-hunting versus a deeply imbalanced supply-demand outlook. Technically, WTI has probably broken down a key support at the $21.4 area and may move lower to seek for new support at around $18-19.
China’s NBS manufacturing PMIs smashed expectation from the upside, rebounding to the expansionary territory of 52 last month. While traders are cheering on this encouraging figure, it might be too early to be too optimistic about China’s economic recovery.
Firstly, the NBS PMI represents large corporations and state-owned enterprises (SOEs) which are backed by state subsidies and new fiscal stimulus. What’s important would be the private sector and SMEs, which account for most of the jobs market. Secondly, the rebound in manufacturing sentiment last month may soon reverse as overseas demand for Chinese exports shrunk sharply after the EU and US implemented lockdowns. The roadmap towards a full recovery might prove to be lengthy and choppy.
Singapore’s MAS has announced a policy to allow deferring property mortgage and insurance premium payments for individuals and to provide cash flow support to SMEs. These are strong measures to contain the risk of cash flow breakdown for SMEs and defaults on mortgage or insurance payments by individuals who are adversely affected by Covid-19, and thus prevent systemic risks.
However, deferring mortgage and insurance premium payments might transfer part of the risk to banks and insurance companies, who will then need to tap on the central bank's liquidity facilities to offset the loss of income.
With the global economy on hard brakes like it is now, it would be unrealistic to assume that mortgage and insurance premium payments will remain as healthy as per before the Covid-19 pandemic.
US SPX 500 - Cash chart
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Margaret Yang Yan