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Market Snapshot
Wednesday, 19 April 2017
Global Equities Mixed Amid Political Undercurrents Worldwide
THE DAY AHEAD



Malaysia posts March’s inflation rate.
The Euro Area releases February’s balance of trade and March’s
inflation data.
The US posts the Mortgage Banker’s Association’s (MBA) Mortgage
Applications numbers for the week ended 14 April.
EQUITY MARKETS
Shown in local currency terms.
S&P 500
DJ Euro Stoxx 600
OVERVIEW





US stocks tumble as Goldman Sachs’s earnings disappoint and
commodity prices retreat.
European stocks slide with FTSE 100 Index as British Prime Minister
Theresa May calls for a snap election.
Asian markets end mixed on Tuesday as investors grapple with
economic, political, and geopolitical concerns in the region. Japan
posts second session of gains, after four straight days of declines.
Crude falls on smaller-than-expected US inventory decline.
Pound jumps to six-month high as a UK snap election being called in
June shocks the market.
-0.3%
-1.1%
0.3%
Nikkei-225
MSCI Asia ex-Japan
-0.6%
-0.5%
MSCI Emerging Markets
US TREASURY YIELD CURVE
Shows the yield to maturity of current US bills, notes, and bonds.
DEVELOPED MARKET EQUITIES
3.0%
5.0%
US
US stocks fell, mirroring a drop in global shares led by oil producers and
miners, as commodity prices retreated and Goldman Sachs Group Inc
weighed on financial companies. Treasuries climbed with gold.
4.0%
2.0%
3.0%
The S&P 500 lost 0.29% to close at 2,342.19. The benchmark gained
0.86% on Monday in thin trading – marking its best day since 1 March –
but failed to move back above its 50-day moving average. The Dow Jones
Industrial Average dropped 0.55% to 20,523.28 on Tuesday.
Health care stocks exerted the largest drag on the index, down 1.01%.
Cardinal Health Inc plunged 11.54%, after Reuters reported that Medtronic
Plc was close to selling its medical supplies unit to Cardinal Health for about
USD6b.
Financial shares, meanwhile, were 0.83% lower. Goldman Sachs lost 4.72%
– its worst day since June – after stunning Wall Street with a decline in bond
trading revenue. The stock fell the most since the day after the UK voted to
leave the European Union. Revenue from fixed-income trading of USD1.69b
suffered from weaker demand in commodities and currencies, the New
York-based company said Tuesday in a statement, and missed analysts’
USD2.03b estimate. In contrast, Bank of America Corp’s fixed-income
trading revenue rose about 29% to USD2.93b billion, beating analysts’
USD2.6b average estimate. Last week, JPMorgan Chase & Co and Citigroup
Inc also reported robust first-quarter revenue from bond trading. –
Bloomberg News.
EUROPE
UK equities tumbled on Tuesday after British Prime Minister Theresa May
called for surprise early elections to strengthen her hand in Brexit
negotiations. European stocks were in a broad decline as markets reopened
2.0%
1.0%
1.0%
0.0%
1M
1M
3M
3M
6M
6M
1YR 2YR 3YR 5YR 7YR 10YR 30YR
0.0%
1YR 2YR 3YR 5YR 7YR 10YR 30YR
One year ago
Last Close
Source: DBS CIO Office, Bloomberg, as of the last business day.
Visit the Markets Movers page for more insights:
Market Snapshot 19 April 2017
after the Easter holiday.
The Stoxx 600 Index plunged 1.11% at the close. All industry groups fell,
with energy (-2.99%) and materials (-2.29%) leading declines, the latter
affected by a tumble in iron ore prices. The exporter-heavy FTSE 100 Index
plunged 2.46% in its biggest drop since the aftermath of the Brexit vote, as
the pound rose after May called for a general election in June.
Britain’s snap election adds to the roster of upcoming political events in
Europe, where uncertainty about the outcome of the French presidential
vote has weighed on equities in recent sessions. The FTSE 250 Index of midcaps also fell, dropping 1.16%. Materials shares on the Stoxx 600 Index
suffered as iron ore prices tumbled, after some analysts said they are bearish
on the raw material’s outlook. Energy producers and construction
companies were also among the worst performers on the Stoxx 600 Index,
sending the benchmark to the lowest close since 27 March. – Bloomberg
News.
2
Equity Markets
Returns of equity indices around the world, in local currency terms.
Index
Close
Overnight
YTD
DJIA
20523.28
-0.55%
3.85%
S&P 500
2342.19
-0.29%
4.62%
NASDAQ
5849.47
-0.12%
8.66%
Europe
Euro Stoxx 600
376.35
-1.11%
4.13%
Germany
DAX
12000.44
-0.90%
4.52%
France
CAC-40
4990.25
-1.59%
2.63%
UK
FTSE100
7147.50
-2.46%
0.07%
Asia
MSCI AxJ
578.80
-0.64%
12.53%
US
Japan
Nikkei-225
18418.59
0.35%
-3.64%
JAPAN
China
SHCOMP
3196.71
-0.79%
3.00%
Japan’s Nikkei 225 Index slumped 0.24% to 18,375.03 in early Wednesday
morning trade, after US and European equities suffered losses overnight.
Hong Kong
Hang Seng
23924.54
-1.39%
8.75%
Taiwan
TWSE
9746.56
0.31%
5.33%
On Tuesday, the benchmark rose 0.35% to 18,418.59, following a rebound
in US shares and a weaker yen. This marked its second session of gains,
after four straight days of declines. Four sectors lifted the index by doubledigit points each: telecommunication services (+1.03%), consumer
discretionary (+0.37%), information technology (+0.48%), and industrials
(+0.30%) added between 11.92 points to 16.12 points to the Nikkei 225
Index.
South Korea
Kospi
2148.46
0.13%
6.02%
Indonesia
JCI
5606.52
0.52%
5.85%
Malaysia
KLCI
1740.60
0.38%
6.02%
Singapore
STI
3137.54
-0.02%
8.91%
India
Sensex
29319.10
-0.32%
10.11%
Within the telecommunication services sector, SoftBank Group Corp rose
1.61%. Media reports have said the group is seeking a 20% stake in Paytm
owner One97 for USD1.4b-USD1.9b. Nippon Telegraph and Telephone
Corporation rose 0.97%. Under industrials, Daikin Industries Ltd, Shimizu
Corp, and Obayashi Corporation pulled the sub-sector higher, thanks to
increases of 0.48%, 2.17%, and 2.05%, respectively.
Emerg. Mkt MSCI EM
957.70
-0.52%
11.07%
US Vice President Mike Pence pressed Japan for better trade terms on
Tuesday, even as he affirmed US support for its Asian allies in dealing with
North Korea. In Tokyo, he stressed the need for quick results as he helmed a
new economic dialogue arranged by US President Donald Trump and
Japanese Prime Minister Shinzo Abe. US Commerce Secretary Wilbur Ross,
who was in Japan on Tuesday for separate talks with Trade Minister
Hiroshige Seko, also indicated a desire to push for a trade deal with the
nation. Japan, meanwhile, is persisting with the Trans-Pacific Partnership –
the world’s largest trade deal that Trump pulled out from. – Bloomberg
News.
ASIAN EQUITIES
CHINA
Chinese stocks declined on Tuesday. The Shanghai Composite Index closed
0.79% lower at 3,196.71, the Shenzhen Composite Index was down
0.62% to 1,946.42, and the CSI 300 index of blue-chip stocks finished
0.49% lower at 3,462.63.
Government Bonds
Benchmark yields of major 10-year government bonds.
Latest yield
Previous yield
Change (bps)
US
2.17%
2.25%
-8.16
Germany
0.16%
0.19%
-3.10
Japan
0.01%
0.01%
0.20
China
3.41%
3.42%
-0.40
Taiwan
1.00%
1.00%
0.00
South Korea
2.17%
2.18%
-0.50
Indonesia
7.06%
7.07%
-1.20
Singapore
2.11%
2.11%
0.81
India
6.86%
6.85%
1.70
Commodity futures
Prices of one-month futures contracts, grouped by commodity type.
WTI crude ($/bbl)
Close
1-day
change
1-yr
high
1-yr
low
52.41
-0.46%
55.24
35.24
In just three days the Shanghai Composite Index has fallen 2.44%, the
steepest such decline since mid-December. The psychologically key 3,200
level has been breached for the first time in two months, while a measure
of volatility is climbing.
Gold ($/oz.)
1291.70
0.18%
1377.50
1123.90
Copper ($/ton)
5553.00
-2.15%
6147.20
4625.50
Corn (cents/bu.)
361.75
-1.30%
439.25
301.00
Soybean (cents/bu.)
946.00
-0.76%
1208.50
892.25
As is typical in a USD7t market dominated by individual investors,
pinpointing the reasons for the sudden loss of confidence is hard. Traders
have cited the securities regulator’s increased scrutiny on irregularities in the
market, tensions on the Korean peninsula and fears that a strengthening
economy will prompt more tightening by the central bank. The ChiNext
gauge of small-cap shares, historically a barometer for the availability of
speculative liquidity, has slumped to within a few percentage points of a
two-year low.
Wheat (cents/bu.)
422.50
0.36%
524.00
359.50
Coffee (cents/lb)
145.55
1.43%
181.65
127.70
Sugar (cents/lb)
475.90
1.19%
608.40
414.20
The recent declines represent a swift reversal. Just a week ago the Shanghai
Composite was at heights not seen for 15 months, while volatility was near
the lowest level in at least a decade.
To be sure, a 30-day index of price swings remains historically low after the
Source: Bloomberg, as at the close of the last business day.
YTD refers to year-to-date returns.
Market Snapshot 19 April 2017
stock -market collapse. And the Shanghai index has not closed down more
than 1% on a day since 12 December. Yet the steady losses and increase in
volatility are starting to make some traders jumpy. – Bloomberg News.
HONG KONG
Hong Kong’s Hang Seng Index slumped 1.39% on Tuesday to 23,924.54 –
its steepest loss in four months – as the city’s markets reopened after the
Easter holidays, its steepest loss in four months. The absence of panic in
mainland Chinese equities was a contributing factor behind the gauge’s
9.6% jump in the first quarter – one of the biggest among global indexes.
The Hang Seng Composite Enterprises Index in Hong Kong fell 1.58% to
100,43.52, the lowest since 8 February, catching up with losses on
mainland exchanges. – Bloomberg News.
Sentiment was hit as market participants reacted to geopolitical
developments over the weekend. There was also lingering concern over the
sustainability of China’s economic recovery, Reuters reported. China’s
economy expanded 6.9% in 1Q17 period, beating consensus forecasts and
the central government’s 6.5% target.
Shares in the financial and petrochemical segments were among the most
actively traded on Tuesday as investors took cash off the table. China
Construction Bank Corporation, Industrial & Commercial Bank of China
Limited, and Bank of China Limited declined 1.92%, 1.79%, and 1.62%,
respectively.
REST OF ASIA
Australian shares extended their declines on Wednesday, falling at the open
as investors digested the weak performance in the US equity market
following earnings disappointments. The S&P/ASX 200 was down 0.37% to
5,815.20. Shares in Sydney tumbled on Tuesday following the long
weekend of public holidays. The S&P/ASX 200 dropped 0.90% to 5,836.74
with resource stocks posing the biggest drags amid a selloff in iron ore.
Fortescue Metals Group Limited, Rio Tinto Group and BHP Billiton Limited
plunged 7.45%, 1.94%, and 1.56%, respectively. Investors sold off stocks
in the mining sector on oversupply concerns, triggered by news that China,
which produces half the world’s steel, churned out a record quantity in
March, according to Bloomberg News.
Meanwhile, shares in Telstra Corp Limited (-3.85%) tanked for the fourth
consecutive session as investors fled the counter following rival TPG
Telecom’s Limited win in a spectrum auction.
South Korean equities pulled back slightly in early Wednesday morning
trading as investors paused ahead of rising political uncertainty globally. The
Kospi index was down 0.20% to 2,144.08. The country’s stocks finished
higher on Tuesday as investors shrugged off geopolitical risks and the
Korean won hit a one-week low. The Kospi index rose 0.13% to 2,148.46.
Shares on the medical and precision machines, communication, and
miscellaneous sub-indices pushed the benchmark higher.
Meanwhile, US Vice President Mike Pence said on 18 April, during his visit
to North Asia, that the US trade relationship with South Korea is ”falling
short”, with the free-trade deal between the countries under review. During
Pence’s comments in Seoul, he called the trade gap with South Korea a
”hard truth,” with ”too many” barriers to entry for US businesses.
Pence’s comments come just days after South Korea, the US’s sixth-largest
trading partner, avoided being tagged a currency manipulator by the US
Treasury, though it remains on a watch list of nations deemed at risk of
engaging in unfair conduct. The US has not named any country a
manipulator since 1994. – Bloomberg News.
Taiwanese shares rebounded on Tuesday as anxieties over geopolitical
tensions in the Korean Peninsula subsided. The Taiwan Stock Exchange
Weighted Index (Taiex) rose 0.31% to 9,746.56, led by gains in the
semiconductor industry and electric machinery sub-indices. The biggest
mover of the day was Taiwan Semiconductor Manufacturing Company
Limited, which edged higher by 0.27% and added 4.41 points to the index.
Other movers include Formosa Plastics Corporation, which gained 0.86%
and contributed 1.73 points to the index’s rise.
3
FIXED INCOME
Treasuries rose – pushing most yields down to their lowest since
November 2016 as geopolitical uncertainties, disappointing US data,
as well as expectations that a tax reform from the Trump
Administration will not be imminent continued to drive the market.
The 10-year yield sank 8.2 bps to 2.1682%. Meanwhile, the two-year
yield retreated 4.1 bps to 1.1604% and the 30-year yield tanked 7.4
bps to 2.8354%.
US Treasury yields declined concurrently with UK Gilt yields during
European trading, when the UK 10-year yield traded under 1% for
the first time since October, before rebounding with the pound
following UK Prime Minister Theresa May’s call for an early general
election in June. Treasury yields briefly stabilised as Gilt yields
rebounded, then resumed their declines. US 10-year and 30-year yield
spreads vs. UK counterparts narrowed, with the 10-year spread
approaching its lowest level since mid-February. – Bloomberg News.
COMMODITIES
Crude fell for a second consecutive session on an industry report that
was said to have shown a smaller-than-anticipated US inventory
decline. West Texas Intermediate (WTI) oil slipped 0.46% to
USD52.41 per barrel while Brent crude retreated 0.85% to USD54.98
a barrel.
Supplies fell 840,000 barrels last week according to an American
Petroleum Institute (API) report on Tuesday, people familiar with the
data said. That contrasted with analysts surveyed by Bloomberg who
said supplies probably slipped by 1.4 million barrels. Gasoline
stockpiles rose 1.37 million barrels, the API was said to report. The
Energy Information Administration will release its data on Wednesday.
Separately, industrial metals plunged as traders capitulated amid stock
market declines and skepticism surrounding the outlook for
commodity demand from China and the US. An index of base metals
retreated the most since November.
An analyst was bearish on the outlook for iron ore amid expectations
for global oversupply and a slowdown in Chinese steel demand. Zinc
and nickel, both used in steel alloys, plunged by the most this year as
US stocks dropped. – Bloomberg News.
CURRENCIES
The pound kicked off with a bang after the Easter holidays as UK
Prime Minister Theresa May shocked the market by calling a snap
election in June. Sterling jumped 2.20% on Tuesday to USD1.28, its
highest since early October, 2016. The surge put fresh pressure on
the dollar, which stayed near session lows. The US Dollar Index (DXY)
was 0.79% lower to 99.50 amid disappointing US housing starts
data, as well as a recent deterioration in spending, inflation, and
manufacturing activity.
Trading flows were lopsided and sterling-centric as the pound rose
versus all of its G-10 peers, gaining more than 2 percentage points
against the Canadian and Australian dollars. Strong sterling demand
saw traders unwind long-held pound shorts. The election is seen as a
chance for May to strengthen her hand as the UK enters into Brexit
negotiations with the Eurozone and after an opinion poll Monday
showed the Conservatives with a 21-point lead over Labour. –
Bloomberg News.
Meanwhile, the euro rose to its highest level against the dollar in
three weeks, driven mainly by the rally in pound as well as the overall
weakness in the dollar. It advanced for the fourth straight session, by
a marginal 0.01% to USD1.07.
Source: Bloomberg News, DBS Group Research and Vickers (DBS), Dow Jones
Newswires, Reuters, Agence France-Presse, CNBC, Marketwatch.com
Market Snapshot 19 April 2017
4
FX Round-up (as of New York close)
EUR/USD
FX Technical Outlook
Last
Overnight
change
Day high
Day low
Currency
1.0730
0.82%
1.0736
1.0637
EUR/USD
Levels
Q2 2017F
Q3 2017F
Q4 2017F
Q1 2018F
1.06
1.05
1.05
1.06
GBP/USD
1.2841
2.20%
1.2905
1.2516
USD/JPY
113
114
116
117
USD/JPY
108.4300
-0.44%
109.22
108.32
GBP/USD
1.24
1.22
1.20
1.18
AUD/USD
0.7560
-0.38%
0.7596
0.7534
AUD/USD
0.73
0.72
0.71
0.70
NZD/USD
0.7043
0.50%
0.7043
0.7000
NZD/USD
0.69
0.68
0.68
0.71
USD/CAD
1.3380
0.47%
1.3400
1.3313
USD/SGD
1.41
1.42
1.44
1.45
USD/SGD
1.3958
-0.16%
1.4001
1.3956
USD/CNH
6.90
6.95
7.00
7.05
AUD/SGD
1.0552
-0.56%
1.0621
1.0532
USD/INR
68.8
68.9
69.1
69.3
NZD/SGD
0.9828
0.30%
0.9842
0.9788
USD/IDR
13551
13614
13677
13740
GBP/SGD
1.7924
2.04%
1.8019
1.7510
EUR/SGD
1.4978
0.67%
1.4988
1.4872
AUD/NZD
1.0735
-0.87%
1.0833
1.0721
USD/IDR
13296
0.08%
13303
13286
USD/INR
64.6288
0.18%
64.6425
64.4750
XAU/USD
1290
0.39%
1292.4
1279
Source: DBS CIO Office, as of 30 March 2017.
Notes: Forecasts are in respect of end-of-quarter levels. The information
contained in this publication is not investment research or a research
recommendation. It is intended only to provide the observations and views
of the DBS CIO Office, which may be different from, or inconsistent with,
the observations and views of the DBS Bank research department or other
DBS Bank personnel.
Source: Bloomberg, as of last business day.
SGD Against Major Currencies
108
106
104
102
100
98
96
94
92
90
Oct-16
USD/SGD
GBP/SGD
USD Against Major Currencies
AUD/SGD
EUR/SGD
NZD/SGD
120
EUR/USD
GBP/USD
AUD/USD
NZD/USD
USD/JPY
115
110
105
100
95
Dec-16
Feb-17
Apr-17
90
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17 Mar-17
Source: Bloomberg, as of last business day.
Bond risk rating changes
Bond Name
12-Apr-17
EIBKOR 5 04/11/22
EXPORT-IMPORT BK KOREA
1
2
Tenor reduction
13-Apr-17
FHCL 7 PERP
FULLERTON HEALTHCARE
5
4
Re-rated based on issuer equity risk rating of 5
13-Apr-17
BEIAIJ 3 7/8 04/06/24
INDONESIA EXIMBANK
5
4
Re-rated based on S&P issuer rating of BB+
13-Apr-17
JPFAIJ 6 05/02/18
COMFEED FINANCE BV
4
5
S&P upgraded paper rating from B+ to BB-
13-Apr-17
PBBGR 1 5/8 07/04/17
DEUT PFANDBRIEFBANK AG
2
3
S&P upgraded issuer rating from BBB to A-
13-Apr-17
FGBUH 5 04/01/19
FIRST GULF BANK
1
2
Moody's upgraded paper rating from A2 to Aa3
13-Apr-17
FGBUH 3 1/4 01/14/19
FIRST GULF BANK
1
2
Moody's upgraded paper rating from A2 to Aa3
13-Apr-17
FGBUH 2.862 10/09/17
FIRST GULF BANK
1
2
Moody's upgraded paper rating from A2 to Aa3
13-Apr-17
RIOLN 4 1/8 05/20/21
RIO TINTO FIN USA LTD
2
3
Moody's upgraded paper rating from Baa1 to A3
Information updated as of 13 April 2017.
Issuer
Risk rating
New
Existing
Effective
Reason
Apr-17
Market Snapshot 19 April 2017
5
GLOSSARY
General Product Risk Rating
A 5-point scale, 1-5, indicates the relative rating of potential loss; “1” being the lowest and “5” being the highest.
Bond Risk Rating
Credit Rating
(S&P / Moody's)
AAA
AA
Outstanding Tenor (Up to X Years)
1
2
3
4
5
1
A
2
BBB
3
6
7
8
9
10
11
12
14
15
16
17
18
19
20
99 Perpetual
3
4
BB
B & Below
5
Equity Sector Classification
Sector
Cond:
Cons:
Enrs:
Finl:
Hlth:
Indu:
Inft:
Matr:
Prop:
13
2
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Property
Valuation Terminology
Equities
EPS:
P/E:
P/B:
EG:
Bonds
YTM:
YTC:
YTP:
Earnings Per Share
Price to Earnings Ratio
Price to Book Ratio
Earnings Growth
Yield to Maturity
Yield to Call
Yield to Put
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