Market Snapshot

Monday, 23 April 2018

Global equities slump on technology selloff; chipmakers’ rout widens

THE DAY AHEAD EQUITY MARKETS
Shown in local currency terms.
• Singapore posts March’s inflation rate.
• Germany announces April’s Markit manufacturing, services, and S&P 500 -0.9%
composite purchasing managers’ index (PMI) flash data.
• The Euro Area releases April’s Markit manufacturing, services, and
composite purchasing managers’ index (PMI) flash data, as well as DJ Euro Stoxx 600 0.0%
2017’s government budget to gross domestic product (GDP) and debt
to GDP.
• Taiwan posts March’s retail sales, unemployment rate, and industrial Nikkei-225 -0.1%
production.
• Hong Kong posts March’s inflation rate.
• Canada announces February’s wholesale sales. MSCI Asia ex-Japan -1.3%
• The US releases March’s Chicago Fed National Activity Index and US
existing home sales, as well as April’s Markit manufacturing, services,
-1.3%
and composite purchasing managers’ index (PMI) flash data. MSCI Emerging Markets

OVERVIEW
US TREASURY YIELD CURVE
• US stocks fall on tech selloff; bond slide deepens. Shows the yield to maturity of current US bills, notes, and bonds.
• Europe equities decline following a down session in Asia.
• Asia stocks slump; chipmakers’ rout widens after Taiwan 4.0%
Semiconductor Manufacturing Company Limited ignites smartphone 5.0%
fears.
3.0%
• Oil rises for a second straight week as the OPEC’s commitment to 4.0%
rebalance the market, and geopolitical risks to global supplies
overshadow Trump’s tweet on “artificially Very High” prices. 3.0%
2.0%
• The US dollar rises, sterling falls as inflation and interest-rate hike
2.0%
expectations dominate focus on both sides of the Atlantic.
1.0%
DEVELOPED MARKET EQUITIES 1.0%

0.0%
US 0.0%
1M 3M 6M 1YR 2YR 3YR 5YR 7YR 10YR 30YR
1M 3M 6M 1YR 2YR 3YR 5YR 7YR 10YR 30YR
US stocks stumbled into the weekend, as renewed selling in technology
shares overshadowed what has so far been a solid earnings season. Inflation One year ago Last Close
concerns sent the dollar higher and Treasury yields topped 2.95%. Source: DBS CIO Office, Bloomberg, as of the last business day.
Major American equity benchmarks fell at least 0.8% on Friday (20 April),
paring gains from earlier in the week (ended 20 April). The S&P 500 Index
lost 0.85% to 2,670.14 and the Dow Jones Industrial Average declined Visit the Markets Movers page for more insights:
0.82% to 24,462.94. Makers of computer chips and hardware bore the
brunt of the selling, with Apple Inc capping for its biggest rout since early
February following a downgrade based on its deteriorating outlook in
China. Trade also remains in focus, with Treasury considering an emergency
law to curb Chinese investments in sensitive technologies.
US Treasury yields rose for a third session even as the stock selloff
worsened. While investors debate the cause of the decline in sovereign
debt, bond market gauges showed an increase in expectations for inflation
after recent torrid gains in metals from aluminium to nickel.
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General Electric Co rose on solid results, one of just four gainers in the Dow
Jones Industrial Average. The company joined the 85% of S&P 500
companies that have topped earnings estimates so far this season by an
average of 7.1%. Alphabet Inc reports Monday (23 April) in what will be
Market Snapshot 23 April 2018 2

one of the busiest weeks for first-quarter results. Equity Markets

Returns of equity indices around the world, in local currency terms.
Still, the late-week selloff in equities damped the mood among investors
looking to earnings season to break stocks out of a two-month range. Index Close Overnight YTD
While companies that have beaten estimates pushed higher, those that US DJIA 24462.94 -0.82% -1.04%
missed were punished far more severely. The chipmaker selloff also
S&P 500 2670.14 -0.85% -0.13%
highlighted market risks, from a potential slowdown in global growth to the
implications of the ongoing trade dust-up between the US and major NASDAQ 7146.13 -1.27% 3.52%
economies. – Bloomberg News.
Europe Euro Stoxx 600 381.84 -0.03% -1.89%
Click here to read our views on US equities for 2Q18.
Germany DAX 12540.50 -0.21% -2.92%
Click here to read our views on the US economy for 2Q18. France CAC-40 5412.83 0.39% 1.89%
EUROPE UK FTSE100 7368.17 0.54% -4.16%
Stocks in Europe declined along with US equity-index futures following a Asia MSCI AxJ 718.18 -1.29% 0.66%
down session in Asia, where technology shares came under earnings-related
Japan Nikkei-225 22162.24 -0.13% -2.65%
pressure. The Stoxx Europe 600 gauge inched down marginally, losing
0.03% to 381.84, as several companies including Sampo Oyj-A and Vivendi China SHCOMP 3071.54 -1.47% -7.12%
SA started trading without the right to the latest dividend. UK shares Hong Kong Hang Seng 30418.33 -0.94% 1.67%
bucked the trend as the pound weakened after Bank of England Governor
Mark Carney dampened expectations for a rate hike next month, and there Taiwan TWSE 10779.38 -1.75% 1.28%
were also reports of disagreements in Brexit talks on the Irish border. South Korea Kospi 2476.33 -0.39% 0.36%
With the Bank of England’s (BOE) next interest-rate decision now on a Indonesia JCI 6337.70 -0.29% -0.28%
knife-edge, all eyes are trained on an expected slowdown in the first quarter
Malaysia KLCI 1887.75 -0.39% 5.06%
and what it means for policy. Growth probably slowed to 0.3% in the three
months through March from 0.4% the previous quarter, according to a Singapore STI 3573.38 -0.70% 5.01%
Bloomberg survey of economists. That is in line with the central bank’s own
India Sensex 34415.58 -0.03% 1.05%
forecast, which was downgraded after unseasonably bad weather hit
activity. Emerg. Mkt MSCI EM 1168.24 -1.34% 0.85%

The importance of the figures has been heightened by Mark Carney’s Government Bonds
unexpected comments that have damped expectations that the BOE will Benchmark yields of major 10-year government bonds.
raise its benchmark rate in May. A hike was seen as a done deal by markets
and economists until Thursday, when the BOE governor noted recent soft Latest yield Previous yield Change (bps)
data and said officials are “conscious that there are other meetings” at US 2.96% 2.91% 5.04
which they could act this year.
Germany 0.59% 0.60% -1.00
The question for policymakers is whether the recent weakness, which was Japan 0.06% 0.04% 1.70
partly due to snowstorms, is temporary or marks another leg down for the
economy. – Bloomberg News. China 3.55% 3.52% 2.70
Taiwan 1.02% 1.01% 0.81
Click here to read our views on Europe equities for 2Q18.
South Korea 2.67% 2.64% 2.50
JAPAN
Indonesia 6.80% 6.69% 11.40
Japan equities opened on Monday (23 April) marginally lower at 22,139.45. Singapore 2.49% 2.42% 6.48
The Nikkei 225 Index lost 0.13% to 22,162.24 on Friday (20 April).
India 7.72% 7.63% 8.80
Japanese Finance Minister Taro Aso will not have an easy homecoming.
Commodity futures
After he flies back from Washington, Aso is likely to face further media Prices of one-month futures contracts, grouped by commodity type.
questions and calls for his resignation amid a string of scandals at the
finance ministry. In Washington, he said he is not considering stepping 1-day 1-yr 1-yr
Close
down, but a political backlash could intensify given Aso attended his first G- change high low
20 gathering in a year despite failing to get parliament’s approval. WTI crude ($/bbl) 68.38 0.13% 66.66 42.05
Aso is bringing little tangible diplomatic progress after his criticism of Gold ($/oz.) 1336.70 -0.75% 1365.40 1204.00
protectionism in his meeting with US Treasury Secretary Steven Mnuchin
Copper ($/ton) 6968.50 0.11% 7306.50 5597.00
confirmed clear differences on trade policy between the two nations. He did
not get an exemption from US tariffs on metals, either. Earlier in the week, Corn (cents/bu.) 376.50 -1.44% 394.50 328.50
Prime Minister Shinzo Abe’s meeting with US President Donald Trump also Soybean (cents/bu.) 1028.75 -0.82% 1071.00 900.25
highlighted their differences on trade.
Wheat (cents/bu.) 463.25 -2.83% 553.50 386.50
Separately, the Bank of Japan (BOJ) should remain committed to its Coffee (cents/lb) 117.70 1.25% 157.10 116.15
unprecedented monetary stimulus in order to hit a still-distant price target,
Sugar (cents/lb) 342.40 -0.23% 465.50 337.90
according to the International Monetary Fund (IMF).
“Communication has to be simple and straightforward,” Odd Per Brekk, Source: Bloomberg, as at the close of the last business day.
deputy director of the Asia-Pacific Department, said in an interview on YTD refers to year-to-date returns.
Thursday (19 April). “The message has to be the commitment to reaching
the 2% inflation target and to put in place the policies needed to get
there.”. – Bloomberg News.
Click here to read our views on Japan equities for 2Q18.
Click here to read our views on Japan’s economy for 2Q18.
Market Snapshot 23 April 2018
ASIAN EQUITIES
CHINA & HONG KONG
Major North Asia indices tumbled on Friday (20 April), with the Hang Seng
Index shedding 1.09% to 30,372.71, the Shanghai Composite Index
dropping 1.47% to 3,071.54, and the Shenzhen Composite Index dropping
2.00% to 1,778.34.
Asia technology stocks joined their peers in a global swoon, after a
disappointing sales outlook from Taiwan Semiconductor Manufacturing Co
Ltd rekindled concerns that the smartphone industry’s best days may be
behind it. Semiconductor Manufacturing International Corporation – the
largest of the Hong Kong-listed Chinese chipmakers – closed 0.75% lower,
despite hopes Beijing will prop up the industry as its relationship with
Washington sours. – Bloomberg News.
All segments on the Shanghai Composite Index ended lower, with
financials, industrials, and materials dropping 1.15%, 1.72%, and 2.42%,
respectively.
Click here to read our views on Asia ex-Japan equities for 2Q18.
REST OF ASIA
Australia’s S&P/ASX 200 Index rose 0.40% to 5,892.50 in early Monday (23
April) trade, as investors assessed trade discussions amid signs that
geopolitical tensions may be easing. The benchmark lost 0.21% to 5,868.78
on Friday (20 April), as eight out of 11 segments posted declines. The
steepest drop came from telecommunication services (-1.06%), although it
was materials (-0.47%) that dragged on the index the most. Financials and
real estate also subtracted from the overall benchmark, down 0.14% and
0.51%, respectively.
South Korea’s Kospi Index lost 0.07% to 2,474.54 on Monday morning,
after shedding 0.39% to 2,476.33 in the prior session. Samsung Electronics
Co Ltd fell 2.20% while SK Hynix Inc ended 3.98% lower, amid a
chipmakers rout.
Meanwhile, the Taiwan Stock Exchange Weighted Index (Taiex) sank 1.75%
to 10,779.38.
Taiwan Semiconductor Manufacturing Company Limited, Apple Inc’s main
chip supplier and often considered an industry bellwether, tumbled 6.34%
for its biggest lost since July 2013. This was after it predicted current-
quarter sales of about USD1b less than analysts had projected. That
renewed concerns over iPhone X demand and triggered a selloff in
chipmakers around the globe. It did not help that the worrisome growth
forecast came on the heels of a report by the International Monetary Fund
that smartphone shipments declined for the first time. – Bloomberg News.
Click here to read our views on Asia’s economy for 2Q18.
COMMODITIES
Oil rose for a second straight week as the Organization of the Petroleum
Exporting Countries’s (OPEC) commitment to rebalance the market and
geopolitical risks to global supplies overshadowed US President Donald
Trump’s tweet on “artificially Very High” prices.
Trump’s comments came as OPEC and allies including Russia showed a
willingness to further tighten oil markets and boost prices in a meeting in
Saudi Arabia. West Texas Intermediate (WTI) oil futures dropped as much as
1.2% early on Friday (20 April) before rebounding as the impact of the
tweet fizzled. They have risen 10% in two weeks.
Oil ministers from Saudi Arabia, Russia and the United Arab Emirates
pushed back on the charge, saying there is no such thing as artificial prices,
that current market levels reflect geopolitics and that demand is strong.
Crude has rallied in recent weeks as output cuts from OPEC and its allies
were compounded by heightened geopolitical risks, including the possibility
of renewed US sanctions on Iran. US shale producers are also facing
production challenges.
3
“Looks like OPEC is at it again,” Trump said on Twitter early Friday
morning. “With record amounts of Oil all over the place, including
the fully loaded ships at sea, Oil prices are artificially Very High! No
good and will not be accepted!”
Meeting in Jeddah, a committee of OPEC and other oil producers
found high levels of compliance with the production curbs. Still, there
is capacity for prices to rise beyond this week’s three-year high,
according to Saudi Energy Minister Khalid Al-Falih, who said
cooperation between producers would continue into 2019.
WTI for May delivery gained 0.13%, to settle at USD68.38 a barrel in
New York. It rose 1.5% for the week (ended 20 April), after an 8.6%
jump the week before.
Brent crude for June delivery fell at the time of the tweet, before
closing 0.38% higher at USD74.06 a barrel in London. Brent was up
2% for the week.
Trump’s criticism comes in the same week that US oil inventories fell
below their five-year average for the first time since 2014. Brent
moved to almost USD75.00 a barrel on Thursday (19 April), its highest
level in more than three years. – Bloomberg News.
Click here to read our views on oil for 2Q18.
CURRENCIES
Inflation concerns sent the dollar and yields higher. The 2-year yield
touched the highest since 2008. It finished 3.0 bps higher at
2.4573%. The yield on 10-year Treasuries climbed 5.0 bps to
2.9583%, reaching the highest in eight weeks. The US Dollar Index
(DXY) climbed 0.42% to 90.32, the highest in three weeks.
UK government bonds rallied and the pound fell as investors slashed
bets on an interest-rate increase by the Bank of England (BOE) next
month. Money markets in the UK now see about a 56% chance of a
hike when the BOE meets on 10 May, a sharp drop from 82% on
Thursday (19 April). BOE Governor Mark Carney said in an interview
with the BBC late on Thursday that when the Monetary Policy
Committee meets, officials would be “conscious that there are other
meetings” at which they could act this year.
Should Carney’s view mark a turnaround, it would come off the back
of some disappointing economic data, including the UK’s consumer-
price growth cooling to its slowest in a year. Earlier last week (ended
20 April), money markets already reduced bets for a second hike in
November. BOE Monetary Policy Committee member Michael
Saunders stuck to his guns at a speech in Glasgow on Friday, stating
that the need for loose monetary policy is less acute.
The British pound dipped 0.62% to USD1.4000, the weakest in a
month.
The euro declined 0.46% to USD1.2288, the weakest in two weeks.
The Japanese yen fell 0.27% to 107.66 per dollar, the weakest in two
months. – Bloomberg News.
Click here to read our views on currencies for 2Q18.
Source: Bloomberg News, DBS Group Research and Vickers (DBS), Dow Jones
Newswires, Reuters, Agence France-Presse, CNBC, Marketwatch.com
Market Snapshot 23 April 2018 4

FX Round-up (as of New York close)

Overnight
Last Day high Day low
change
EUR/USD 1.2288 -0.46% 1.2353 1.2250
GBP/USD 1.4000 -0.62% 1.4091 1.3997
USD/JPY 107.66 0.27% 107.86 107.36
AUD/USD 0.7672 -0.75% 0.7732 0.7655
NZD/USD 0.7207 -0.89% 0.7273 0.7201
USD/CAD 1.2761 0.70% 1.2768 1.2633
USD/SGD 1.3163 0.36% 1.3174 1.3105
AUD/SGD 1.0096 -0.42% 1.0143 1.0081
NZD/SGD 0.9490 -0.50% 0.9539 0.9473
GBP/SGD 1.8425 -0.28% 1.8507 1.8420
EUR/SGD 1.6178 -0.09% 1.6217 1.6138
AUD/NZD 1.0643 0.12% 1.0663 1.0620
USD/IDR 13893 0.78% 13901 13768
USD/INR 66.1075 0.47% 66.1075 65.9875
XAU/USD 1336.36 -0.68% 1346.41 1334.00
Source: Bloomberg, as of last business day.
SGD Against Major Currencies USD Against Major Currencies
USD/SGD AUD/SGD NZD/SGD EUR/USD GBP/USD USD/JPY
120
106 GBP/SGD EUR/SGD AUD/USD NZD/USD
104 115
102
110
100
98 105
96
94 100

92 95
90
Oct-17 Dec-17 Feb-18 Apr-18 90
Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18
Source: Bloomberg, as of last business day.

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