Oct 10, 2016

    Stocks may stay soft over US, Brexit issues

    SINGAPORE shares are likely to be weighed down at the start of the trading week by a tepid Wall Street on Friday.

    Shares in the United States ended lower after the latest set of US job data fuelled speculation that the Federal Reserve will likely raise interest rates in December.

    The US Labor Department said on Friday that the world's biggest economy added 156,000 jobs in September.

    This was slightly below forecasts but not weak enough to prevent a rate hike by December, analysts said.

    Fed vice-chairman Stanley Fischer said the jobs report was "close" to ideal, showing employment growth was neither too fast nor too slow.

    Another potential market-moving event is the release of the September meeting minutes of the US Federal Open Market Committee early Thursday morning Singapore time.

    Asia closed in the red on Friday following wild swings in the British pound due to worries over a potentially difficult divorce between Britain and the European Union.

    More volatility is ahead as sentiment is likely to remain fragile ahead of the Nov 8 US presidential elections, an ongoing local corporate earnings recession and rising technical recession risk, according to DBS Group Research.

    The second US presidential debate between Democrat nominee Hillary Clinton and Republican candidate Donald Trump this morning will be closely watched.

    "Risk-asset markets fear Trump. The polling results show a consistent picture of a neck-and-neck race since late September. What is becoming clear is the equities market is uncomfortable with a Trump victory.

    "But the US dollar - a safe haven asset - rises when the odds of a Trump win rise," noted DBS Investment Insights.

    Meanwhile, Singapore's third quarter gross domestic product and the policy statement by the Monetary Authority of Singapore (MAS) is due on Friday.

    Analysts believe that the MAS will likely maintain its current neutral monetary policy stance as the country's economic and inflation developments have not deteriorated sufficiently for it to contemplate further easing for now.

    "Growth is sluggish but not weak enough to prompt a policy response," Capital Economics said.