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Global Economics & Markets Research Summary (25 October 2017)

Core Content Overview

This report provides a comprehensive overview of global economic and financial market conditions as of 25 October 2017. It covers key economic data releases, central bank outlooks, foreign exchange (FX) movements, equity market performance, US Treasury yields, and commodity prices, along with market holidays and events.

Main Highlights

Key Data Releases

• Australia: 3Q inflation data is due on Wednesday (25 Oct).
• Bank of Canada (BOC): Expected to hold interest rates, with a decision on Wednesday (25 Oct) and a press conference following.
• United States: Busy data docket includes Sep durable goods orders, FHFA August house price index, and Sep new home sales. Focus remains on the earnings calendar and domestic politics.
• United Kingdom: Preliminary 3Q 2017 GDP data is reported on Wednesday (25 Oct). UK Brexit secretary Davis is set to appear before lawmakers on the same day.
• Germany: October IFO survey is due.
• European Commission: Releases updated economic forecasts.

Central Bank Outlook

• US Federal Reserve: President Trump sought input from Republican senators on Fed chair nominee, with John Taylor being a likely candidate.
• Bank of England (BOE): 34 out of 48 economists believe the BOE should not raise rates in November. The median probability of a disorderly Brexit rose to 30%.
• Monetary Authority of Singapore (MAS): Ravi Menon emphasized the need for proactive policy if inflation rises, suggesting the SGD NEER normalization plan may begin in April 2018.

FX Market Analysis

• USD: Continued to rise, with the Bloomberg US Dollar Spot Index hitting a 15-week high.
• Yen (JPY): Weaker against the USD, with USD/JPY reaching 114.02.
• GBP: Slight weakening against the USD, closing at 1313.1.
• EUR: Firmed ahead of the ECB decision, closing at 1.1761.
• Asian Currencies: Mixed, with SGD and THB flat, while PHP fell 0.3% and KRW rose 0.2%.

Equity Market Performance

• US Markets: US stock prices surged to record highs on Tuesday (24 Oct) after strong earnings from industrial companies. The Dow Jones rose 0.72%, S&P 500 up 0.16%, and Nasdaq up 0.18%.
• Asia: Asian equity markets gained, with the Nikkei 225 up 0.50%, Shanghai Composite up 0.22%, and Thailand SET Index up 0.55%.
• Southeast Asia: Mixed results, with STI down 0.45%, PSEi down 0.82%, and KLCI down 0.31%.

US Treasuries

• Bond Yields: Rose across the curve as markets prepared for tapering of stimulus. The 2-year note closed at 1.58% (up 1.7bps), the 10-year at 2.42% (up 5.3bps).
• Auctions: The 2-year note auction had a weaker bid-to-cover ratio of 2.74.

Commodities

• Crude Oil: Prices increased on Tuesday due to geopolitical tensions in Iraq, declining US inventories, and OPEC's production cuts. US WTI rose to $52.47, while London Brent increased to $58.33.
• Gold: Fell due to a stronger USD and expectations of central bank stimulus pullback, closing at $1,275.

Economic News & Data

• US Manufacturing PMI: Preliminary October data rose to 54.5 (from 53.1), above expectations.
• US Services PMI: Increased to 55.9 (from 55.3), beating forecasts.
• Eurozone Manufacturing PMI: Rose to 58.6 (from 58.1), while Services PMI eased to 54.9 (from 55.8), missing forecasts.
• Japan Manufacturing PMI: Preliminary data fell to 52.5 (from 52.9).
• China: The ruling Communist Party approved a revised charter, enshrining Xi Jinping's ideology, signaling his continued influence on policy.

Market Holidays/Events

• Philippines: All Saints Day (Nov 1), Bonifacio Day (Nov 30)
• Japan: Culture Day (Nov 3)
• US/JP: Thanksgiving (Nov 23)
• South Korea: Election Day (Dec 20)
• SG/MY: Christmas Day (Dec 25)

Summary of Key Economic Indicators (24-25 October 2017)

UOB RMB Fixing Model Prediction

• The PBoC is expected to set the midpoint weaker at 6.6328/USD, a third consecutive day of depreciation.

SGD NEER Forecast

• UOB predicts SGD NEER to trade between 1.0% and 1.5% above the midpoint, suggesting a USD/SGD range of 1.3567 - 1.3634.