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The onslaught of trade tension escalation and growth concerns had been a double whammy for markets over the weekend, sparking the evasion to safety which may well sustain amid the uncertainties.

Wave of growth concerns sparking risk aversion

Over and above President Donald Trump’s suggestion that the September US-China trade talk may not carry on, cautions on growth from the likes of Goldman Sachs and Bank of America had been the latest to elicit a new round of selling for equities market at the start of the week. Consequently, we are likewise seeing Asia markets, many including the local Singapore market returning from the long weekend and experiencing sustained weakness going into the Tuesday session.

While the silver lining here may well remain policy support, expected across the US to China, the implementation of another round of tariffs nevertheless remains the key threat to reckon with for global markets. The fear is that the deteriorating data may not be able to withstand another shock in the form of tariffs. In turn, this had seen to the continued extension of the US 10-year/3-month yield curve inversion to a steeper 35 basis points, signalling recession.

We had highlighted the VIX as one to watch in the face of uncertainty, but it had been the haven assets truly gaining strongly at the start of the week. USD/JPY can be seen testing the $105.00 level as we pen this, while the likes of gold prices shot through the roof at above $1500. To some extent, the market had largely priced in the expectation for further deterioration in trade relations but given the lack of evidence that this pelting of threats is ready to let up, staying the course with the havens may remain the preferred choice. Look to early-2018 lows for USD/JPY at around $104.60.

Source: IG Charts

Singapore’s 2019 growth forecast lowered

Notably, the final reading for Singapore’s Q2 GDP was seen unchanged from the advanced release at 0.1% year-on-year in the morning release against the consensus for a slight uptick to 0.2%. At the same time, 2019’s growth forecast had been lowered by the authorities to a mere 0.0%-1.0% range, somewhat below expectations. The details itself had largely reflected a continued dent in the manufacturing sector at -3.1% YoY as the services sector was revised lower to 1.1% YoY growth. While the figures had not been a surprise for the market, seeing the relatively unchanged USD/SGD still trudging the over 2-year highs territory, it continued to spell weakness for this bellwether aligning with the abovementioned concerns on trade impact.

The local Singapore market can be seen returning from the long weekend to reflect the selling pressure. A double top pattern can be seen here for the STI, but amid the latest development, it will be one watching a continued downtrend with the 3100 level being the next support.

Source: IG Charts

Yesterday: S&P 500 -1.22%; DJIA -1.48%; DAX -0.12%; FTSE -0.37%


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