Nov 30, 2015

    Investors eye US, Opec for clues

    THIS week is shaping up as a nervous one for traders as they look ahead to a likely United States interest rate rise - and weigh the impact of China's latest crackdown on securities industry malpractice.

    A slew of economic data is on the offing, some of it from the US, which could offer new clues on whether the Fed will indeed raise rates.

    Fed chair Janet Yellen is due to testify on Thursday, then attention will turn to non-farm payrolls set for release on Friday. It could show a gain of 200,000 jobs last month, after October's surge of 271,000.

    The data, noted IG market strategist Bernard Aw, could be "critical" ahead of the Federal Open Market Committee meeting on Dec 16 and 17 - widely expected to result in the first rate rise in nearly a decade.

    "Furthermore, Fed chairman Janet Yellen will provide her testimony to the Congressional Joint Economic Committee about the economic outlook, which would set the expectations concerning the pace of the policy tightening," he said.

    Wall Street edged down 0.08 per cent on Friday in a short half-day trading session following the Thanksgiving Day holiday.

    "We've actually had a pretty stable market for all the things that have been hitting at it," Tom Stringfellow, president and chief investment officer of San Antonio-based Frost Investment Advisors, which manages about US$11 billion (S$16 billion), told Bloomberg.

    "The data that spooked the market over the last half a dozen weeks is behind us and I think we've gotten past the shock of whether a rate hike is a certainty at this point."

    Ministers from the Organisation of the Petroleum Exporting Countries (Opec) are also meeting on Friday to decide on their collective oil production quota, which stands at 30 million barrels a day.

    This could result in a possible cut in its output, as the weakness in oil prices continues to stretch out.

    Opec has exceeded its output target since June last year, with an average of 31.6 million barrels in the first 10 months of this year.

    The European Central Bank meeting on Thursday is also one to watch out for, given that more stimulus measures could come as economic recovery in the euro zone remains fragile.

    Markets were shaken early last week after Turkey downed a Russian fighter jet, escalating geopolitical tensions.

    Jitters increased on Friday, after China's stocks tumbled the most since a US$5 trillion plunge in August as the authorities launched regulatory probes into some of the country's largest brokerages. At the same time, industrial profits fell short of expectations.

    Singapore's benchmark Straits Times Index (STI) slid 25.57 points, or 0.89 per cent, to 2,859.11 - marking a loss of 58.79 points, or 2 per cent, for the week.

    "It looks like the STI is battling downward pressure, despite overall gains in Chinese shares since August," said Mr Aw, adding that a warning from the Monetary Authority of Singapore (MAS) on risks for local lenders did not help sentiments.

    MAS noted that weaker balance sheets and currency market volatility may be key risks for local banks, while non-performing loans have grown 1.5 per cent year-on-year.

    This did little for the three banks, whose share prices have been slipping in recent sessions. OCBC Bank, for instance, shed a hefty 2.8 per cent for the week to finish at $8.68.

    Neptune Orient Lines was also in the spotlight, following its confirmation the previous weekend that it is in exclusive talks with France's CMA CGM on a possible buyout.

    The stock, which has been gaining ground since the start of the year on market talk over a potential acquisition, closed at $1.205, logging a weekly jump of 7.6 per cent.