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Global Economics & Markets Research Summary (June 20, 2018)

Core Content Overview

This document provides a comprehensive overview of global economic and financial market trends, central bank outlooks, FX rates, equities, commodities, and bond yields as of June 20, 2018. It also includes key economic data and upcoming market events.

Key Market Highlights

• G7 Data Docket: Light, with only the US existing home sales and New Zealand's first quarter growth figures expected.
• Trade Tensions: Escalating US-China trade tensions caused Asian markets to decline, with Chinese stocks suffering significant losses. Xiaomi postponed its CDR listing in China until after its Hong Kong IPO.
• Central Bank Actions:
  • The Bank of Thailand and Philippines Central Bank (BSP) are set to announce rate decisions.
  • The BSP is expected to raise rates by 25 bps to 3.50%, following a recent hike.
  • Bank Indonesia signaled readiness for further rate hikes to align with global central banks.
• FX Movements:
  • Safe-haven currencies (like JPY) outperformed due to trade tensions.
  • USD/JPY fell 0.5% to 110.06.
  • USD/SGD hit 1.3600, the highest since November 2017.
  • CNY weakened against the USD, with the PBoC setting a firmer central parity but spot CNY still down 0.7%.
  • SGD NEER is expected to trade between the midpoint and 0.5% above it, suggesting a USD/SGD range of 1.3527-1.3595.

Equities Performance

• US Equities: S&P 500 fell 0.4%, Dow Jones dropped 1.1%, and Nasdaq Composite fell 0.3% amid trade tensions.
• Asian Equities:
  • SHCOMP and Shenzhen Composite fell sharply, with SHCOMP down 3.8%.
  • HSI and Nikkei 225 lost 2.8% and 1.8% respectively.
  • STI closed down 0.7%, marking its 5th consecutive session of losses.
• Market Sentiment: Hong Kong and Japan stock index futures suggested a possible market calm, despite ongoing trade tensions.

US Treasuries

• US Treasuries gained on risk aversion but gave back some gains as stocks recovered.
• The 10-year yield dropped to 2.851% but ended the day at 2.896%, a 2bp decline.

Commodities

• Brent crude fell 26 cents to $75.08/bbl, pressured by trade tensions.
• Gold dropped 0.3% to $1,274.66/oz, as the USD rose.

Economic News & Data

• Malaysia CPI: Expected to rise 1.8% y/y in May (from 1.4% in April).
• Thailand and Philippines central banks will announce rate decisions today.
• China's Commerce Ministry condemned the US trade measures as "extreme pressure and blackmail" and warned of strong retaliation.
• PBoC injected CNY200 bn via MLF, signaling support for the market.
• US Data:
  • NAHB Housing Market Index at 68 (June).
  • Chicago Fed Nat Activity Index at 0.34 (May).
  • Philadelphia Fed Business Outlook at 34.4 (June).
• Philippines:
  • Economic Planning Secretary said the peso can sustain a small depreciation.
  • Analysts expect the BSP to raise rates again to anchor inflation expectations.

FX Rates (as of 19 June 2018)

Stock Indices (as of 19 June 2018)

SGD NEER Estimation

• Midpoint: 1.3591
• Lower-End: 1.3869
• Upper-End: 1.3325
• Expected Range: USD/SGD 1.3527-1.3595

Interest Rates

Market Holidays & Events

Main Views & Key Information

• Trade Tensions: A major driver of market volatility, impacting equities and FX rates.
• Central Bank Policies: The BoT and BSP are expected to maintain or increase rates, while the PBoC remains supportive of the market.
• FX Volatility: The USD strengthened against most currencies, with the SGD NEER indicating a potential range.
• Equities: Asian markets were hit hard by trade tensions, while US equities showed some recovery.
• Commodities: Oil and gold fell, reflecting a weaker demand outlook and a stronger USD.
• Bond Yields: US Treasuries showed mixed performance, with the 10-year yield declining slightly.