US markets back with a bang

Tuesday saw US markets back from the long weekend and channeling bullish sentiment into the stock markets.

S&P 500
Source: Bloomberg

Asian markets, which has thrived over past two sessions without strong leads, could find the optimism from US markets a support for prices in the region on Tuesday.

Overnight we have seen the S&P 500 index and the Dow Jones scoring new highs in a substantial manner. The comprehensive S&P 500 index closed up 0.60% with gains cutting across all sectors and led by the utilities and consumer staples sectors.

Prices were seen firmly breaking above the 2350 resistance level. US stocks had likely remained in the embrace of the Trump euphoria in anticipation of his tax policies, helped once again by hawkish comments from Fed members. 

The energy sector, one of the only two sectors with year-to-date (YTD) losses, managed to retrace some losses at the start of the week. OPEC Secretary-General Mohammad Barkindo’s reaffirmation that members will continue to lower production gave confidence to oil bulls and the energy sector alike.

WTI futures was seen spiking above $54.50 per barrel (bbl) overnight and remained just below the level into Asia hours. Prices can be seen trading at the top end of the $51.50-$54.50/bbl channel in which it has remained since December 2016, though I am not too confident of a strong break here. Watch for US oil inventory reports this week, with the market expecting a seventh consecutive week of crude build up. 

Early movers in Asia were seeing subdued movements last checked at 9am (Singapore time). The Nikkei 225 was last seen clocking only mild gains after USD/JPY retreated slightly from the progress made overnight. There has been a strong focus on the comments from Fed members, noticeably raising the likelihood of a March Fed hike.

Although this had not translated to overwhelming expectations of an imminent Fed hike by the market, the US dollar had certainly gained strength on the first day back from the President’s Day holiday.

The local bourse saw sentiment moderate further on Tuesday after the announcement of Budget 2017 at the start of the week. However, Wednesday could spell a change for the STI and most Asian markets with the positive US leads. Keep watch of Genting Singapore PLC’s earnings release after market hours today.

For the day ahead, Malaysia’s January inflation rate and Hong Kong’s Q4 GDP will be of interest during the Asian session. UK Q4 GDP update and US January existing home sales data have also been lined up for release.

Yesterday: S&P 500 +0.60%; DJIA +0.58%; DAX +1.18%; FTSE -0.34%


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