Global Economics & Markets Research Summary
Core Content Overview
This document provides a comprehensive analysis of global economic and financial market conditions as of August 2018, focusing on key economic indicators, central bank outlooks, foreign exchange rates, equity indices, bond yields, and commodities. It also highlights upcoming economic data releases and market holidays.
Key Economic Highlights
Markets Overview
- Eurozone: Germany's trade and industrial production data for June will be released, with industrial orders showing a significant monthly decline.
- UK: Halifax house prices for July will be reported, expected to reflect ongoing trade tensions.
- US: The JOLTS job openings for June will be released, with the market relatively quiet overall.
- Asia: Several Asian economies (Singapore, China, Hong Kong, Indonesia, Malaysia, Philippines, and Taiwan) will report July foreign reserves data. Taiwan will also release July inflation and trade data, with export and import growth expected to remain stable despite recent US-China tariffs.
Central Bank Outlook
- RBA: Expected to keep the official cash rate at 1.50% in August, with the first rate hike anticipated in 2019.
- US Fed: James Bullard suggests that investors should focus on the yield curve rather than waiting for an inevitable recession, indicating a solid economic outlook.
- China: The PBoC is likely to set the CNY central parity lower by about 86 pips at 6.8599/USD, continuing the long-term trend of CNY weakness.
- Indonesia: 2Q18 GDP growth exceeded expectations at 5.27% y/y, with the economy showing resilience. A 25bps rate hike is expected in 3Q and 4Q.
Foreign Exchange (FX) Summary
- USD: Continued to rise, supported by trade war rhetoric and a strong US economy.
- GBP: Fell to a new 11-month low against USD, with GBP/USD at 1.2920.
- EUR/GBP: Traded over 0.8930, while GBP/JPY dipped to 144.00.
- EUR/USD: Initially rebounded from a 4% fall in German factory orders but later declined.
- USD/SGD: Closed at 1.3682, with SGD NEER remaining 1.06% above the midpoint.
- CNY: Continued its decline against USD, with CNH ending at 6.8656/USD.
- Other Currencies: MYR, IDR, THB, PHP, INR, TWD, and KRW showed mixed movements, with some currencies affected by geopolitical events and others showing relative stability.
Equities Summary
- US Markets: Major indices (Dow, S&P 500, Nasdaq) rose, with the Nasdaq seeing a notable gain due to Facebook's performance. The tech-heavy index had a five-day winning streak.
- Asia-Pacific: SHCOMP fell 1.3% on Monday due to trade tensions, while HSI and STI showed modest gains. The Jakarta Composite Index rose 1.56%, indicating positive momentum.
US Treasuries
- Yields: US Treasury yields dipped, with the 10-year yield hitting a two-week low due to safe-haven demand from trade conflicts.
- Refunding Schedule: The US government will sell $78bn in coupon-bearing securities this week, with key dates for 3-year, 10-year, and 30-year bonds.
Commodities Summary
- Gold: Under pressure due to a stronger USD and expectations of further Fed rate hikes.
- Oil: Rose as OPEC sources indicated a decline in Saudi crude production, raising concerns about global supply amid US sanctions on Iran.
Economic News & Data Releases
- Germany: Industrial orders fell 4.0% m/m in June, the worst since 2017, with foreign demand down 4.7%.
- Indonesia: 2Q18 GDP growth reached 5.27% y/y, exceeding expectations. Exports and imports grew at 7.70% and 12.66% y/y, respectively.
- China: Current account returned to a small surplus in 2Q18, indicating a more balanced economic position.
- Taiwan: Foreign reserves rose to a record high of $458.50bn in July, with inflation and trade data expected to be released.
- India: Deferred retaliatory tariffs on certain US imports to 18 September from 4 August.
FX Rates (as of 06 Aug 2018)
| Currency |
Close |
Asian High |
Asian Low |
NY High |
NY Low |
| EUR |
1.1538 |
1.1574 |
1.1530 |
1.1574 |
1.1530 |
| GBP |
1.2935 |
1.3021 |
1.2932 |
1.3021 |
1.2930 |
| AUD |
0.7388 |
0.7408 |
0.7382 |
0.7408 |
0.7374 |
| NZD |
0.6734 |
0.6756 |
0.6730 |
0.6756 |
0.6725 |
| JPY |
111.46 |
111.48 |
111.15 |
111.53 |
111.15 |
| SGD |
1.3685 |
1.3687 |
1.3653 |
1.3694 |
1.3653 |
| MYR |
4.0800 |
4.0805 |
4.0752 |
4.0805 |
4.0752 |
| IDR |
14478 |
14493 |
14469 |
- |
- |
| THB |
33.35 |
33.36 |
33.18 |
- |
- |
| PHP |
52.905 |
53.125 |
52.848 |
- |
- |
| INR |
68.889 |
68.893 |
68.540 |
- |
- |
| TWD |
30.630 |
30.678 |
30.600 |
- |
- |
| KRW |
1123.84 |
1125.32 |
1121.93 |
- |
- |
| HKD |
7.8493 |
7.8494 |
7.8482 |
- |
- |
| CNY |
6.8535 |
6.8576 |
6.8010 |
- |
- |
Stock Indices (as of 06 Aug 2018)
| Indices |
Closing |
% Chg |
YTD % Chg |
| Dow Jones Industrial Average |
25502.18 |
+0.16 |
+5.07 |
| S&P 500 |
2850.40 |
+0.35 |
+4.86 |
| NASDAQ Composite |
7859.68 |
+0.61 |
+4.65 |
| Tokyo Nikkei 225 |
22507.32 |
-0.08 |
+0.91 |
| London FTSE 100 |
7663.78 |
+0.06 |
+0.35 |
| Frankfurt DAX |
12598.21 |
-0.14 |
+2.37 |
| All Ordinaries |
6358.99 |
+0.52 |
+3.11 |
| FTSE Straits Times Index |
3285.34 |
+0.60 |
+0.51 |
| FTSE Bursa Malaysia KLCI |
1779.75 |
-0.02 |
+5.22 |
| Jakarta Composite Index |
6101.13 |
+1.56 |
+5.21 |
| Thailand SET Index |
1696.24 |
-0.93 |
+6.31 |
| Philippines PSEi |
7817.31 |
-0.03 |
+8.67 |
| Taiwan Weighted Index |
11024.10 |
+0.11 |
+1.73 |
| Korea KOSPI |
2286.50 |
-0.05 |
-1.70 |
| Hong Kong Hang Seng Index |
27819.56 |
+0.52 |
-3.92 |
| Shanghai Composite Index |
2705.16 |
-1.29 |
-5.00 |
| India Sensex 30 Index |
37691.89 |
+0.36 |
+6.40 |
UOB's SGD NEER Estimation (as of 07 Aug 2018)
- Mid-Point: 1.3829
- Lower-End: 1.4111
- Upper-End: 1.3558
- Expected range: 1.3558 - 1.4111, implying a USD/SGD range of 1.3627 - 1.3694.
Interest Rates
| Currency |
Current Rate |
Next CB Meet |
UOB Forecast |
| USD |
1.75-2.00% |
27 Sep |
1.75-2.00% |
| EUR |
0.00% |
13 Sep |
0.00% |
| GBP |
0.75% |
13 Sep |
0.75% |
| AUD |
1.50% |
07 Aug |
1.50% |
| NZD |
1.75% |
09 Aug |
1.75% |
| JPY |
0-0.10% |
31 Jul |
0-0.10% |
| SGD |
- |
- |
- |
| MYR |
3.25% |
05 Sep |
3.25% |
| IDR |
5.25% |
16 Aug |
5.25% |
| THB |
1.50% |
08 Aug |
1.50% |
| PHP |
3.50% |
09 Aug |
3.50% |
| INR |
6.00% |
- |
6.00% |
| TWD |
1.375% |
27 Sep |
1.375% |
| KRW |
1.50% |
31 Aug |
1.50% |
| HKD |
1.00% |
- |
1.00% |
| CNY |
4.35% |
- |
4.60% |
Commodities (as of 06 Aug 2018)
| Commodities |
Closing |
% Chg |
| NYMEX Crude (Sep) |
69.01 |
+0.76 |
| Comex Gold (Aug) |
1208.60 |
-0.46 |
| Reuters CRB Index |
193.93 |
+0.36 |
Bond Yields (as of 06 Aug 2018)
| Bond Yields |
Closing |
Net Chg |
| US 2-Year Bond |
2.65 |
+0.0 |
| US 10-Year Bond |
2.94 |
-1.0 |
| JP 10-Year JGB |
0.11 |
- |
| EU 10-Year Bund |
0.39 |
-2.0 |
| UK 10-Year Long Gilt |
1.30 |
-3.0 |
Market Holidays/Events
- AU: 6 Aug – Bank Holiday
- SG: 9 Aug – National Day
- TH: 12 Aug – Queen's Birthday
- SK: 15 Aug – Liberation Day
- IN: 15 Aug – Independence Day
- ID: 17 Aug – Independence Day
- PH: 21 Aug – Ninoy Aquino Day
- SG/MY/ID/IN: 22 Aug – Hari Raya Haji
- PH: 27 Aug – National Heroes Day
- UK: 27 Aug – Summer Bank Holiday
- MY: 31 Aug – National Day
- ID/MY: 11 Sep – Awal Muharram
Key Viewpoints
- The USD is likely to continue its upward trend due to trade war optimism and a strong economy.
- The RBA is expected to maintain a neutral stance and delay rate hikes until 2019.
- The CNY is under pressure and expected to remain weak, despite recent stability measures.
- Trade tensions are a significant factor affecting global markets, particularly in Asia.
- The US economy shows resilience, with a focus on the yield curve for rate hike signals.
