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Although the ISM manufacturing index still showed that US manufacturing activity remains in contraction, it bounced strongly from 48.2 to 49.5. The improvement added to evidence that pressure on manufacturing is somewhat easing. Construction spending grew more than expected at +1.5% MoM against expectations of +0.3%. This was driven by an increase in non-residential government construction.
Gains in oil also sustained the risk appetite for much of the US session. As a result, US indices advanced over 2% on Tuesday. S&P 500 headed closer to the key 2000 level. This risk uptake is expected to carry over to Asia, helped by signs of demand in Chinese stock markets.
Yesterday: S&P 500 +2.4%; DJIA +2.1%; DAX +2.3%; FTSE +0.9%
Euro facing more downside pressure
The EUR/USD was capped below the 1.09 mark during the overnight session and traded as low as 1.0850 as ECB President Draghi made dovish comments relating to inflation. He said that euro-area inflation continues to be weaker than expected, adding that any review of stimulus measures ‘has to be seen against the background of increased downside risks to the earlier outlook amid heightened uncertainty.
Deteriorating inflation outlook in the Euro-area puts more pressure on the ECB to be aggressive at the March 10 meeting. There is therefore more room for further downside for the EUR/USD. Nonetheless, there is a need to be cautious about market expectations relating to how much stimulus is anticipated at the March meeting. A less aggressive package may instead lift euro, as what we have seen late last year.
Singapore’s fourth telco
The potential fourth telco in Singapore, MyRepublic Ltd, expects to remain profitable within three years of winning a license, due to its lower costs. The company aims to start off with at least 250,000 users in the first year, and building that to a 9% market share or more than 700,000 customers within five years by offering unlimited data plans.
Insufficient data was a key gripe of users of the existing three telcos, and an unlimited data plan from MyRepublic may pressure them to do the same. At the moment, SingTel has about half of the mobile service market. Singtel share prices have been recovering since hitting below S$3.40 on 26 January, however it appeared to be held back by the 100-day moving average.
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