Standing on the sidelines

Tuesday had been all peace and calm, with a retreat in volatility ahead of the set of blockbuster data and events due to roll out.

Source: Bloomberg

The dollar index appears to be stuck in a period of consolidation, having moved less than half a percentage point in the day and trading at sub-98.000 levels in the morning. The dollar index has repeatedly failed to see a firm break above the level and would really need a significant trigger a take-off from the current consolidation range.

Asian currencies took the opportunity to retrace some losses after the dollar retreated on Monday from the weaker Fed hike sentiment and poor US data.

Some of the worst hit emerging Asian currencies such as the KRW and MYR earlier were the biggest gainers against the USD in this case. USD/SGD was also off Monday’s 7-month highs and settled around 1.3850 levels. Expect China’s data releases to guide movements in the day.

Equities saw a very different story despite the VIX declining 5.7% on Tuesday. The S&P 500 index gapped higher at the start of the session on the back of better than expected earnings from Netflix and IBM, and remained supported with more upside surprises in the day. Amongst the ones being watched, Goldman Sachs led the positive sentiment, overshooting analysts’ expectations by 25.8%. Flat opening calls are seen for the Nikkei, HSI and STI for Asian markets today, having rallied ahead on Tuesday.

As we dive deeper into the earnings season, a generally healthy outlook has been presented. Of the 11% of companies on the S&P 500 reported thus far, a whopping 82.5% surpassed expectations. The 12 financials companies have all outperformed expectations and this may be the kind of optimism flowing to Singapore banks ahead of Q3 earnings releases.

Meanwhile, we have also seen some movements in oil prices in the morning. WTI picked up significantly in the morning as reports came in speculating a pullback in crude oil inventories in the API report due tonight. Recalling last week’s releases, both the API and EIA reports have pointed to an uptick in inventories which sent oil prices retreating. WTI was last seen at eyeing $51/bbl and higher prices may be the case should the EIA report on Wednesday night move in line with API.

We will have a number of items to watch for mid-week. Besides the highly anticipated China Q3 GDP, more earnings report will stream in. The local STI will also see Singapore exchange and real estate firm CapitaCommercial Trust after hours before the US Presidential debate screens again on Thursday.

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