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UOB Economic-Treasury Research
Monday, 3 February 2014
Weekly Update
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Weekly Review (for week ending 31 January 2014)
Global Markets:
US financial markets tumbled heavily on the first trading day of February on Monday (3 Feb) as the
US manufacturing turned out way below expectation at 51.3 (from 56.5 in Dec) following the weak
Chinese PMI earlier last week while extremely bad weather hit US auto sales hard in January. Brewing
ill in the background was the continued turmoil in emerging markets. Both the euro and yen made gains
against the dollar while US Treasury prices increased across the curve as the markets were spooked by the
weaker US manufacturing data and the on-going EM turbulence pushed investors into safe haven demand.
There will be some US data releases on Tuesday (4 Feb) including January New York ISM, December
factory orders and the February IBD/TIPP economic optimism survey while the focus of the US markets will
continue to be on the US corporate earnings reports.
Elsewhere in the rest of the developed economies, the data docket is relatively light on Tuesday (4 Feb) with
just UK Halifax house prices for January, UK January construction PMI, December euro-zone PPI, and
January Italian CPI.
Equities
US financial markets tumbled heavily on the first trading day of February on Monday (3 Feb) as the
US manufacturing turned out way below expectation at 51.3 (from 56.5 in Dec) following the weak
Chinese PMI earlier last week while extremely bad weather hit US auto sales hard in January.
Brewing ill in the background was the continued turmoil in emerging markets and how the bad
weather is going to impact the US economy. The S&P 500 closed 40.70 points (-2.28%) lower at
1,741.89 while the Dow Jones Industrial Average (DJIA) was lower by 326.05 points (-2.08%) to close at
15,372.80. The NASDAQ was the worst performer among the three major indices as it fell by 106.92 points
(-2.61%) to 3996.96. The CBOE Volatility Index (VIX) surged to 21.44 (from 18.41 previously), the highest
since end December 2012.
US Treasuries
The US Treasury prices continued to rise across the curve as yields retreated markedly for Monday
(3 Feb) due to the disappointing US manufacturing data, and brewing turmoil in EM. The 10Y US
Treasury closed 9 bps lower at 2.5761% while the 5-year UST yield ended lower as well by 5.4bps to end at
1.4365%. The 2Y UST yield headed lower by 3.7bps at 0.29%. As for US Treasury auction activity, the
US Treasury will sell the regular 4-week bills and 52-week bills on Tuesday (4 Feb).
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United Overseas Bank (Malaysia) Bhd. (271809K)
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UOB Economic-Treasury Research
Weekly Update
Monday, 3 February 2014
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Commodities
US oil prices slid markedly on Monday (3 Feb) after weak manufacturing data in the US and China
fuelled worries about demand in the world’s two biggest oil consumers. US Nymex futures decreased
US$1.06 to close at US$96.43 while the London Brent oil futures fell by a smaller US$0.36 to $106.04/bbl.
Gold price increased on Monday (3 Feb) as investors continued to prefer the precious metal above
equity and the market gyrations is prompting a re-think of the pace of QE tapering by the Fed under
the new Chair, Janet Yellen. The gold price increased by US$20.30 and closed at US$1,260.40 on 3
February.
Economic Data and News
US total cars sales in January disappointed as the bad winter weather dampened demand. Car sales fell
to 15.16million units (from 15.30 million in Dec) and well off the projected 15.7million.
The US ISM’s purchasing managers index (PMI) eased markedly to 51.3 in January from 56.5 in
December, with the new orders component almost stalling while the inventories fell further to 44.
Asian Markets:
Today is a relatively light day for Asian data. South Korea’s January inflation, released this morning, came in
at 1.1%, in line with expectations. Also, from Hong Kong, we will see both PMI and retail sales (Dec) being
released later today. Markets in China and Taiwan are closed for holidays today.
Equity
Markets in China, Hong Kong, Taiwan and Malaysia were closed yesterday.
In North Asia, Japan’s Nikkei 225 ended the day with a 1.98% decline as telcos (-5.06%), financials
(-2.84%), utilities (-2.82%), and consumer services (-2.38%) sectors dragged overall index performance.
For the South Korean market, we saw drops in the industrials (-2.18%), financials (-1.93%), basic materials
(-1.58%), and oil & gas (-1.40%) which weighed on the KOSPI that showed a decline of 1.23%.
Southeast Asian stock markets were mostly in the red as well, with the Indian SENSEX falling the most with
a 1.48% decline. Other than that, we also saw declines in the STI (-1.20%), JCI (-0.74%), and PSEi
(-0.43%). The SET (+1.45%) ended the day with gains coming from almost all sectors, with the strongest
being telcos (+2.32%), basic materials (+2.03%), and industrials (+1.68%).
After the release of the poorer-than-expected US ISM manufacturing data, overnight downward moves in the
Dow Jones Industrial Average (DJIA) may weigh on Asian stock market performance today. The DJIA closed
below its 200dma for the first time since 28th Dec 2012, while the S&P 500 saw the biggest daily drop
(-2.3%) since June 2013, while trading volume spiked to a 7-month high.
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United Overseas Bank (Malaysia) Bhd. (271809K)
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UOB Economic-Treasury Research
Weekly Update
Monday, 3 February 2014
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Economic News
Just released this morning, South Korea’s January inflation came in as expected at 1.1% y/y, similar to
previous month’s number.
China’s non-manufacturing PMI (Jan) turned lower and reached 53.4, compared to 54.6 registered a month
ago. Nevertheless, the HSBC/Markit manufacturing PMI for other Asian countries, released yesterday,
turned out better. For example, South Korea’s PMI registered 50.9, compared to 50.8 a month ago;
Indonesia’s PMI registered 51.0, compared to 50.9; India’s PMI registered 51.4, compared to 50.7.
Thailand’s January inflation edged higher to reach 1.93% y/y, compared to the 1.67% y/y registered in the
previous month. Consensus was expecting a lower 1.76% y/y rate. Core inflation also moved higher to
1.04% y/y in the same month, compared to 0.55% y/y in December (consensus expected 0.96% y/y). In a
separate note, the opposition Democrat party intends to file a petition to the Constitutional Court today in an
attempt to annul the Thai election held last Sunday.
The inflation situation in Indonesia was opposite to what we saw in Thailand. Yesterday’s release show that
Indonesia’s January inflation reached 8.22% y/y, lower than the 8.38% y/y registered a month ago and
consensus expectations of 8.34% y/y. On a separate note, Indonesia’s Dec exports grew 10.3% y/y, much
better than expectations of 1.7% y/y and the contraction of 2.3% y/y on Nov.
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The information herein is given on a general basis without obligation and is strictly for information purposes only. It is not intended as an
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howsoever caused, or for any decision or action taken based on the information or views expressed in this publication. The Company
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expressly disclaims liability for any errors, inaccuracies or omissions. Any opinions, projections and other forward looking statements
regarding future events or performance of, including but not limited to, countries, markets or companies are not necessarily indicative of,
and may differ from actual events or results.
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may wish to seek advice from an independent financial advisor before investing in any investment or insurance product. Should you
choose not to seek such advice, you should consider whether the investment or insurance product in question is suitable for you.
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United Overseas Bank (Malaysia) Bhd. (271809K)
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