Market likely to react to weak US jobs data
THE weaker-than-expected United States employment data for last month, which came out on Friday, is expected to set the market's tone in the early part of the week.
The non-farm payroll data has led to expectations that the US central bank might not raise interest rates until the third quarter, as recovery in the world's biggest economy has yet to gain a consistent, steady footing.
It showed that employers added just 126,000 jobs last month, breaking the US labour market's year-long streak of robust monthly job creation.
This was the smallest gain since December 2013. The advance over the prior 12 months averaged 269,000 jobs. In comparison, a Bloomberg survey of 98 economists of last month's data had a median forecast of 245,000 new jobs.
The US unemployment rate was unchanged at 5.5 per cent.
The Labour Department's report "might delay the Fed's first rate hike until September, particularly when added to the signs of slower gross domestic product growth in the first quarter", said Capital Economics' chief US economist Paul Ashworth.
But, he said in a note, last month's data was not pointing to the start of a new slump, as had been witnessed occasionally in the US economic recovery cycle.
"All the other labour market indicators that we track...suggest that labour market conditions are still very strong," he said, pointing to low initial jobless claims, the job openings rate - which is near a record high - and robust employment indices in various activity surveys.
Markets in the US were closed on Friday and will be closed today. But futures contracts traded for 45 minutes after the data was released, giving investors a window to react. S&P 500 futures expiring in June lost one per cent to 2,039.75.
The Straits Times Index on Thursday rose 6.73 points or 0.20 per cent to 3,453.75.
For the week, the index was up 0.11 per cent. The index's immediate resistance is seen at 3,460 points.
The market has been quite devoid of big drivers to latch onto in recent weeks, with the recent raft of Singapore economic data pointing to weak growth in the first quarter.
"Currently, the market doesn't have strong drivers. Maybe we will have some direction when first-quarter earnings are out in coming weeks," said remisier Desmond Leong at Phillip Securities.
Meanwhile, the expectation of higher US rates has been nudging up the Singapore interbank offered rate (Sibor), a key rate used to price most home loans, to the highest in six years.
The three-month Sibor hit 1.01959 per cent on Thursday, up from 1.01446 on Tuesday, with more increases seen coming once rates in the US start to rise.
Nomura last week said it continues to like the Singapore bank counters because the rising short-term rates "offer them significant operating leverage".
It noted that most of the Singapore dollar loans of the local banks are pegged to both the three-month interbank rate and the three-month swap rate which, have more than doubled compared to last year's average.
Nomura's top pick is DBS Bank, followed by OCBC Bank.