20180720-大华银行-Markets_Overview_5页_221kb

Global Economics & Markets Research Summary

Core Content Overview

This document provides a comprehensive analysis of global economic and financial market developments as of 20 July 2018, with a focus on key economic indicators, central bank outlooks, foreign exchange (FX) rates, equity indices, US Treasury yields, commodities, and market holidays.

Key Highlights

• Global Economic Docket:

  • New Zealand released tourist and migrant counts for June, while Japan reported CPI data for June and the All Industry Activity Index for May.
  • The European economic docket included UK public finances, Spain’s May trade data, and Germany’s June PPI.
  • No major US economic reports were released on the day.

• FX Market Movements:

  • The US dollar fell after President Trump criticized the Fed for raising interest rates, leading to a rebound in EUR/USD and GBP/USD.
  • USD/CNY spiked from 6.72 to 6.78, breaking the 6.70 resistance level.
  • The Asia Dollar Index (ADXY) fell from 106 to 105.50 due to the CNY's weakness.
  • SGD weakened only slightly against USD, with USD/SGD reaching 1.3745 before drifting back.
  • The SGD/NEER remained at a 0.75% premium above the policy band's estimated mid-point.

• Central Bank Outlook:

  • Bank Indonesia (BI) left its policy rates unchanged, maintaining a hawkish stance and a "ahead of the curve" strategy to stabilize the domestic financial market.
  • US President Trump expressed dissatisfaction with the Fed’s rate hikes but reaffirmed support for the Fed's independence, leading to a White House statement on non-interference.

Economic News & Data

• US Job Market:

  • US initial jobless claims dropped to 207,000, the lowest since 1969, indicating a strong labor market.
  • The four-week moving average of initial claims fell to 220,500.
  • US Treasury yields flattened, with the 2-year and 10-year yield spread narrowing to 25.10bps, close to the flattest level since 2007.

• Australia:

  • Employment increased by 50.9k in June, lifting annual growth to 2.8% y/y.
  • Labour force participation rate rose to 65.7%, slightly below the cyclical high.

• New Zealand:

  • Annual net migration dropped to 65,000, reflecting fewer foreign arrivals and more domestic departures.

• UK:

  • Retail sales declined 0.5% m/m in June, following two months of strong growth, but showed a 3% y/y increase.
  • UK CPIH rose to 2.3% y/y in June.

• Japan:

  • The CPI for June rose to 0.8% y/y, while the Reuters Tankan survey for July was released.

• China:

  • The CNY weakened significantly, with the PBoC lifting the central parity fixing rate to 6.7066.
  • The CFETS RMB Index is expected to fall sharply due to the CNY's weakness.
  • The CBIRC emphasized supporting small and micro enterprises with lower lending rates.

• Other Markets:

  • South Korea will report on PPI for June.
  • Taiwan will release export orders for June.
  • Thailand and Malaysia will update on foreign reserves for July.

Equities Performance

• US Equity Indices:

  • Major indices fell on Thursday, influenced by Trump's criticism of the Fed.
  • The Dow Jones dropped 0.53%, the S&P 500 slipped 0.40%, and the Nasdaq Composite fell 0.37%.
  • Despite mixed earnings reports, over 13% of S&P 500 companies reported results, with 85.1% exceeding expectations.

• Global Indices:

  • Tokyo Nikkei 225 declined 0.13%.
  • London FTSE 100 rose 0.10%.
  • Frankfurt DAX fell 0.62%.
  • All Ordinaries rose 0.41%.
  • FTSE Straits Times Index increased 1.14%.
  • FTSE Bursa Malaysia KLCI rose 0.35%.
  • Jakarta SE Composite Index fell 0.33%.
  • Thailand SET Index rose 0.67%.
  • Philippines SE PSEi declined 0.85%.
  • Taiwan SE Weighted Index fell 0.07%.
  • Korea SE KOSPI dropped 0.34%.
  • Hong Kong Hang Seng Index fell 0.38%.
  • Shanghai SE Composite Index declined 0.53%.
  • India Sensex 30 Index fell 0.06%.

Commodities

• Gold:

  • Prices declined slightly after Trump criticized the Fed, but rebounded from fresh one-year lows.

• Oil:

  • Crude prices fell due to concerns about global supply, despite a brief rally on Saudi Arabia's export comments.

Market Holidays/Events

• Thailand:
  • Asrnha Bucha Day (Jul 27), King's Birthday (Jul 30), Queen's Birthday (Aug 12)
• Australia:
  • Bank Holiday (Aug 6)
• Singapore:
  • National Day (Aug 9)
• South Korea:
  • Liberation Day (Aug 15)
• India:
  • Independence Day (Aug 15), Krishna Janmastha (Sep 3)
• Philippines:
  • Ninoy Aquino Day (Aug 21), National Heroes Day (Aug 27)
• United Kingdom:
  • Summer Bank Holiday (Aug 27)
• Malaysia:
  • National Day (Aug 31)

Interest Rates

• USD Fed Funds Rate: 1.75-2.00%
• EUR Refinancing Rate: 0.00%
• GBP Repo Rate: 0.50%
• AUD Official Cash Rate: 1.50%
• NZD Official Cash Rate: 1.75%
• JPY Official Cash Rate: 0-0.10%
• SGD 3-Mth SIBOR: 1.63%
• MYR O/N Policy Rate: 3.25%
• IDR 7-Day Repo Rate: 5.25%
• THB 1-Day Repo Rate: 1.50%
• PHP O/N Reverse Repo: 3.50%
• INR Repo Rate: 6.00%
• TWD Discount Rate: 1.375%
• KRW Base Rate: 1.50%
• HKD Base Rate: 1.00%
• CNY 1-Yr Working Capital: 4.35%

UOB’s Estimation of SGD NEER

• Lower-End: 1.4078
• Upper-End: 1.3526
• Mid-Point: 1.3796

Disclaimer

• This document is for informational purposes only and should not be used for investment decisions.
• It is not an offer, recommendation, or advice to buy or sell any financial products.
• The views expressed are those of the author and do not reflect the actual trading positions of UOB Group.
• The information is based on publicly available data and is subject to change.