Markets on roller coaster amid fear, hope, greed, Business News & Top Stories

SINGAPORE – The markets were on a roller coaster last week as the forces of fear, hope and greed collided.

Fear of inflationary forces put downward pressure on stocks, while hope of more long-term upside was fanned by signs of a sequential economic recovery.

Meanwhile, greed kept stocks grinding higher despite mixed signals from various data releases.

A positive close on Friday (June 11) saw the New York mainboard’s Dow Jones index cutting its loss to 276.79 points, or 0.8 per cent, for the week to end last Friday at 34,479.60 points.

However, the broader S&P 500 index ended flattish with a 17.55 point, or 0.4 per cent, gain for the week at 4,247.44 points. The tech-heavy Nasdaq, which has been volatile in recent weeks, gained 254.93 points, or 1.8 per cent, for the week to end last Friday’s session at 14,069.42 points, supported by the big techs and semiconductor stocks.

Singapore’s Straits Times Index (STI) ended at 3,157.97 points, up 5.93 points, or 0.2 per cent, for the week.

With about a 40-point range between its high (3,188.00) and low (3,145.79) since the end of last month, this is a comparatively calm start to the month. The banks, which account for 40 per cent of the index, were flattish during the week.

There were subtle signs of portfolio rotation since end May with the STI’s five strongest stocks over the previous month – Sats, CapitaLand Integrated Commercial Trust, Genting Singapore, Singapore Airlines and Mapletree Commercial Trust – showing signs of volatility. On the other hand, Yangzijiang Shipbuilding and Sembcorp Marine seem to be attracting more interest of late.

Technology stocks continued to be mixed.

AEM Holdings and Venture Corp saw combined net institutional and net proprietary outflows close to $8 million and $6 million respectively this month, while UMS Holdings and Nanofilm Technologies International saw net institutional and net proprietary inflows of $8 million and $6 million respectively.

Wing Tai Holdings and Hong Leong Asia were among the ST All-Share Index’s top performers.

Inflation remains the big concern for the market.

With last month’s United States consumer prices up 5 per cent year on year following a 4.2 per cent gain in April, there will be increased scrutiny of what the Federal Reserve will do next.

Analysts say the consumer price index numbers last month were nudged up by a narrow base.

“Recent inflation reads have been positively skewed by a small number of goods impacted by the pandemic,” said Mr Kelvin Tay, UBS chief investment officer for Asia-Pacific.

“The May reading, for example, was pushed higher by a 29.7 per cent year-on-year increase in the price of used cars and trucks, accounting for around a third of the overall rise in inflation. This appeared to be due to a shift away from public transport during the pandemic, combined with a dearth of fresh supply as fiscal support lowered the number of Americans defaulting on car payments and abnormal demand from car-leasing companies. Gasoline prices rose 56.2 per cent in the year to May.”

This week’s two-day Fed meeting starting on Wednesday will be closely watched for whether the central bank will shift its position on its tapering.

Fed boss Jerome Powell has always insisted that the priority is jobs, and with over 10 million Americans still jobless or underemployed, an immediate shift in position looks unlikely.

Also likely to calm markets is the fact that bond yields have fallen quite significantly over the past month from 1.7 per cent to just above 1.4 per cent now.

Mr Vasu Menon, executive director for investment strategy at OCBC Wealth Management, is also watching how other central banks respond to inflationary pressures.

“The Fed aside, markets will also be keep a watch on the Bank of Japan, the Swiss National Bank and the Indonesian central bank which will also meet to decide rates,” he said. “What they say about the inflation outlook and possible policy action will also have some bearing on the markets.”

On the data front, US May retail sales data is due tomorrow, and will be a key piece of information for the week.

China will be announcing a slew of key data for last month on Wednesday, including retail sales, industrial production and fixed asset investment. Markets are expecting the data to show a moderate slowdown as China tightens credit to reduce leverage in the economy. If the data turns out better than expected, it could offer some respite to investors worried about a sharp slowdown in China’s economy, said Mr Menon. If the data surprises on the downside, it may weigh on global markets, especially bourses in Asia.

Expect a volatile trading week ahead amid the continuing interplay between fear, hope and greed.