3 Market News to start your trading week – 05/06/17 June 5, 2017

This trading week may prove to be exciting to many due to various events which happened over the weekend and also the upcoming events this week. The following news may have the most impact to the global and regional markets.

1) US Job Reports failed to Match Expectations

The US economy added 138,000 jobs in May, which is well below the forecasts of 185,000 new jobs. However according to the US Labour Department on Friday, the employment rate still fell to a 16 year low of 4.3%. This soft headline on job numbers failed to derail expectations of the Federal Reserves implementing a second rate hike on 14th June during the FOMC meeting. In fact, based on CME FedWatch, there is a 94.6% probability of raising rates by 25 basis points.

With the US economy showing signs of faster than expected growth, investors may like to monitor the FOMC minutes after it is out, to look for signs if there may be an unexpected fourth rate hike this year. Should the fourth rate hike happen, banking related counters may benefit from it.

2) President Trump have just withdrawn from the Paris accord

After the announcement that the US is pulling out of the Paris Climate Agreement last week, crude oil prices took a hit, falling more than 1% on Friday, posting a second straight week of losses. This is due to worries that President Trump’s decision to abandon a climate pact could spark more crude oil drilling in the US, worsening a global glut.

Moreover, with U.S. drillers adding 11 rigs last week, in a record stretch of 20 straight weeks of additions, and President Trump’s bid to sell half of US oil reserves, it can be seen that the America First Energy initiative in which President Trump emphasized during his campaign may come true. Even with OPEC extending production cuts by 9 months, this move by the US may likely impede further upside on crude. If oil prices continue to fall due to oversupply, local offshore and marine counter may be impacted negatively. Should investors still want to invest in oil related counters, they may want to look at those with diversification.

US exit from the Paris accord also made good President Trump’s campaign promise, and his intention to bring coal mining back to the US. However it may take quite some time to raise the percentage of America’s power which is generated by coal. This is because, natural gas and renewables are relatively cheap at the moment, and they are used to power-up US power plants at the moment. Hence, should coal be used to generate more American power, these existing power plants have to either be converted to coal power plants, or more coal power plants have to be built.

3) Terrorist Attacks seem to be on the rise

Over the weekends, yet another terrorist attack occurred; this time in London. In fact over the past few weeks, there have been numerous terror attacks, with some happening in ASEAN, which is close to Singapore.

Last week, the Ministry of Home Affairs’ terror report highlighted that Singapore is under the highest terror threat in recent years. During the 2017 Budget, it was announced that our defence budget (both the Minister of Home Affairs and Ministry of Defence) would have a 2% increase over 2 years.

Hence this may indicate the importance of defence and military strength during such times, and should terror attacks continue, countries will most likely heighten their security and defence spending. When that happens, companies which are into technology related to defence, or companies which are producing weapons may benefit.

Should you want to know more information on the markets or what to look out for, you can speak to a Dealer at a Phillip Investor Centre near you.