Jun 06, 2016

    Traders wait on FOMC meet, Brexit vote

    MARKETS globally, including Singapore, will be eyeing a key speech by Federal Reserve chairman Janet Yellen today, after Friday's release of shockingly low data on payroll growth.

    Dr Yellen will speak at the World Affairs Council of Philadelphia in the United States.

    Market participants are divided over the impact of the weakest monthly gain of 38,000 US jobs in over five years, with many analysts saying it will likely cause the Fed to push back another interest rate hike.

    At home, some market observers expect the Straits Times Index (STI) to trade within a range until the next Federal Open Market Committee (FOMC) meeting on June 15.

    Until the latest jobs report, global and US economic developments had satisfied the preconditions for raising rates this month. Now, many traders believe that has been pushed back.

    However, Capital Economics said in a Friday report that investors are unlikely to stay on the sidelines for long as "low valuations indicate that a lot of bad news is already priced into emerging market equities".

    Although the weak data took a toll on Wall Street on Friday, emerging markets including Singapore are expected to react positively, in the hope that the Fed may be less inclined to tighten policy further in the near term, Capital Economics added.

    Meanwhile, the outcome of the Brexit referendum on June 23 - on whether Britain remains in the European Union - could cause a ripple effect on global financial markets, said IG market strategist Bernard Aw.

    DBS Group Research said: "Until the June 23 referendum passes, the initial STI recovery is likely guarded. We see near-term technical resistance at 2,835."

    Both DBS and Citi Research say the timing of the June FOMC meeting, which occurs just a week before the Brexit referendum, is another potential obstacle to a rate hike this month. "But a July hike is possible if economic data is supportive of one," DBS said.

    Meanwhile, shares of Noble Group are seen to be weighed down by news of a new rights issue, and a series of top management changes.

    Just days after the commodity trader announced the resignation of its chief executive, Yusuf Alireza, founder Richard Elman said he was stepping down as executive chairman.