Investors brace for market pullback

Prices of safe haven assets have been ticking up over the past week as investors are getting increasingly jittery and appear to be bracing for a pullback in riskier assets.

The French national flag above the Elysee palace in Paris
Source: Bloomberg

Just last week, investors were spooked by concerns over accounting problems over Portugal’s largest list bank, Banco Espirito Santo. There are also worries of growth stalling in the Eurozone, particularly in France.

Reflecting signs of increased fears in the market, the Volatility Index (VIX) rose 17% last week to 12.08 on Friday. 

Over the same period, this sent investors into safe haven assets such as gold, which ticked up 1.37% to $1,338.70, while the yen gained 0.74% against the greenback.

Investors are also likely to become more selective in their stock picks, as they brace for what might be a disappointing earnings season, particularly in US small caps. This ended the week down by more than 4%.

Ahead of the Singapore Open

Based on Saturday’s close of the futures market, we are calling the MSCI Singapore to open up by 0.05% to 375.55 points, which are the leads seen on Friday night.

Sentiment could take a hit from this morning’s disappointing Singapore Q2 GDP numbers, dragged down by a manufacturing slump. The economy shrank 0.8% quarter-on-quarter, missing market estimates of a 2.4% rise; and grew 2.1% year-on-year, below the consensus forecast of 3.1%.

Hopefully, things will turn out better for China’s Q2 GDP numbers out on Wednesday. This will give a gauge of how well the country’s mini-stimulus measures have rolled out since April. Growth is expected to come in at 7.4%, unchanged from the previous quarter. Any positive surprises will help support copper and iron prices and possibly benefit the Australian dollar.

We’ll see Japan industrial production numbers for May out later this afternoon. A good reading will be bearish for USD/JPY.

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