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Global Economics & Markets Research Summary (22 June 2018)

Core Content Overview

This report provides a comprehensive analysis of global economic and market conditions as of 22 June 2018, covering key economic indicators, central bank decisions, FX rates, equity indices, commodities, and bond yields. It also outlines upcoming market events and holidays.

Key Highlights

• Economic Data Releases:

  • Manufacturing PMIs from Germany, France, Eurozone, and the US are expected today.
  • Canada will release May's consumer price data, which may indicate potential for a July rate hike.
  • In Asia, Taiwan's May unemployment rate, Hong Kong's 1Q18 balance of payments (BOP), and Thailand's FX reserves are due today.

• Central Bank Outlook:

  • The Bank of England (BoE) kept interest rates at 0.50% with a 6-3 vote, but Chief Economist Haldane unexpectedly supported a 25bps rate hike.
  • The BoE expects gradual and limited future rate increases due to inflation and economic conditions.
  • Bundesbank President Weidmann indicated that the ECB's decision to end bond purchases is the first step in a multi-year normalization process.
  • IMF Managing Director Lagarde highlighted trade tensions and Brexit uncertainty as key risks to eurozone growth, with a potential downward revision of growth forecasts in July.

• FX Market Movements:

  • The USD fell against most G-10 peers, with the dollar index hitting a 11-month high before retreating.
  • GBP/USD surged 0.5% due to Haldane's unexpected rate hike vote.
  • EUR/USD traded near an 11-month low but rebounded.
  • CNY fell to a 5-month low, with the PBoC adjusting the central parity rate.
  • SGD remained strong, hitting a 7-month high against USD but closing little changed.
  • IDR, THB, MYR, and PHP all weakened against USD.

Equity Market Performance

• US Equities:

  • Dow Jones fell for the 8th consecutive day, with a decline of 196 points.
  • S&P 500 and Nasdaq Composite declined by 0.6% and 0.9%, respectively, due to concerns over global trade and energy stocks.

• Asian Equities:

  • Taiwan SE Weighted Index rose slightly, while Shanghai Composite and Hang Seng Index fell by 1.37% and 1.35%, respectively.
  • Philippines PSEi dropped 2.3% following a rate hike by the BSP.
  • China saw a wave of companies pledging to buy their own shares amid market downturns, similar to 2015.

US Treasuries

• Yields fell across the curve overnight as equities declined.
  • 2-Year Yield dropped 3bps to 2.536%.
  • 10-Year Yield fell 4bps to 2.896%.

Commodities

• Oil prices dropped, with Brent crude falling 2.3%.
• Gold continued to decline, reaching a new yearly low before slightly rebounding.

Interest Rates

• USD Fed Funds Rate remains at 1.75-2.00%, with the next meeting on 2 August.
• GBP Repo Rate is at 0.50%, with no change expected in the near term.
• SGD NEER is expected to trade between 1.3538 and 1.3607, based on current levels.
• TWD Discount Rate was unchanged at 1.375%, with expectations of a rate hike in Q1 2019.

Key Market Events

• OPEC Meeting on 22 June: Expected to consider increasing production by 500,000 to 1 million barrels per day, despite opposition from Iran.
• China’s Trade Policy: President Xi emphasized economic openness and warned against trade protectionism.
• India’s Retaliation: Increased import duties in response to US steel and aluminum tariffs.
• Market Holidays: Include HKSAR Establishment, Independence Day (US), Marine Day (Japan), and Hari Raya Haji (Singapore, Malaysia, Indonesia, India).

Summary of Key Data Points

Disclaimer

This document is for informational purposes only and does not constitute investment advice. It is not intended for distribution or use in any jurisdiction where it may be unlawful. UOB Group may have positions in the securities mentioned and does not guarantee the accuracy or completeness of the information provided.