Daily Morning Note – 2 June 2022
US equities started the month lower after a strong set of data suggested the Federal Reserve has not yet slowed growth enough to tamp down inflation, while JPMorgan Chase & Co.’s Jamie Dimon warned restrictive policies threaten to tip the economy into recession.
US equities started the month lower after a strong set of data suggested the Federal Reserve has not yet slowed growth enough to tamp down inflation, while JPMorgan Chase & Co.’s Jamie Dimon warned restrictive policies threaten to tip the economy into recession.
The yield on 10-year Treasuries spiked higher as traders raised bets on the path for rate hikes. Oil rose ahead of an OPEC+ meeting to discuss supply policy. And tech shares outperformed, led by a 10% surge in Salesforce Inc. The business-software giant jumped the most in nearly two years after raising its forecast in a sign demand remains robust.
The strong data landed in a market where investors are on edge over whether the Fed’s tighter policies will induce a recession, a sentiment underscored by Dimon’s comments. The central bank has twice raised rates since March and signaled it will enact two additional 50 basis-point increases at its next meetings.
Stocks to watch: Singapore Exchange
SG
The Singapore Exchange (SGX) announced Wednesday (Jun 1) that the central depository (CDP) has made available to market participants a blockchain-enabled bond issuance platform by Marketnode. Through the digitalisation of manual processes in bond issuance and the full elimination of a paper trail, the platform enables debt issuers to shorten the settlement time for new-issue bond offerings to 2 days, instead of 5. The shorter settlement time is in line with the typical settlement period for the secondary bond market. OCBC’s US$100 million Euro Commercial Paper issuance is the first transaction on the “direct-to-depository” platform, which connects debt issuers into SGX CDP.
Luxury watch retailer The Hour Glass announced Wednesday (Jun 1) that wholly owned subsidiary The Hour Glass (Australia) has entered into a sale-and-purchase agreement to acquire a freehold property in Brisbane for A$82.2 million (S$81.4 million). Occupying a site of about 1,521 square metres (sq m), the 2-storey retail and office building has a total net lettable area of 2,030 sq m. The property is at the junction of Edward Street and Elizabeth Street, which is within the main luxury retail precinct in Brisbane’s central business district. In a bourse filing, The Hour Glass said the acquisition is in line with its strategy of owning properties in prime locations in selected cities.
Malaysia-based YTL Power International has completed its acquisition of Hyflux’s Tuaspring power station. In a statement on Wednesday (Jun 1), the international utility group said its wholly owned subsidiary, YTL PowerSeraya, had completed the purchase at S$270 million in cash. It noted that the original purchase consideration was S$331.45 million, which was to be settled by a combination of S$230 million in cash, S$101.45 million in shares and shareholder loans in a holding company of YTL PowerSeraya. YTL Power did not elaborate further on why the deal was restructured.
Over 70 participants have signed up to share data on the Singapore Trade Data Exchange (SGTraDex), a digital utility which aims to tackle supply-chain inefficiencies by connecting partners in the local and global supply chains via a common data infrastructure. Participants include the 3 local banks DBS, OCBC and UOB, as well as PSA, Jurong Port, commodity trader Trafigura, and energy companies ExxonMobil Asia Pacific and Chevron. The public-private initiative was launched Wednesday (Jun 1) on the sidelines of Asia Tech x Singapore (ATxSG) 2022 by Josephine Teo, Minister for Communications and Information and Minister in-charge of Smart Nation and Cybersecurity.
Singapore has secured at least 66 new events for the rest of 2022, including some that were relocated from Hong Kong, as the meetings, incentives, conventions and exhibitions (Mice) industry ramps up activities in the second half of this year. This includes the return of some marquee international events, such as Food Hotels Asia Food and Beverage and Food Hotels Asia HoReCa, said the Singapore Tourism Board (STB) on Wednesday (Jun 1). Both events will take place at Singapore Expo in September and October respectively and are expected to have more than 30,000 physical attendees each. Jewellery and Gem World Singapore, SuperReturn Asia and Cosmoprof Asia – all of which were previously held in Hong Kong – have been moved to Singapore this year due to the ongoing pandemic situation there.
US
Gamestop reported first-quarter revenue that exceeded market expectations on Wednesday (Jun 1), as the video game retailer pivots toward a more online-focused model amid increasing competition from large retailers such as Walmart and Amazon.com. Store closures during the Covid-19 pandemic affected GameStop’s physical retail business, for which it is primarily known. The company has been bolstering its online sales capabilities as shopping trends towards e-commerce accelerated during the pandemic. GameStop had in May launched its digital asset wallet to store, send, receive and use cryptocurrencies and non-fungible tokens (NFTs). The wallet could also be use for transactions on GameStop’s NFT marketplace, expected to go live later this year.
The euro edged further away from a one-month high on Wednesday and the US dollar nudged up, lifted by higher Treasury yields as global inflation worries flared anew. The dollar index, which measures the currency against six major peers, including the euro, rose 0.2 per cent to 101.96, extending Tuesday’s gains, when data showed euro zone consumer inflation soaring to a record. The euro was down 0.2 per cent against the greenback, continuing to edge back from a one-month high of US$1.0787, reached on Monday, when national inflation readings from the euro zone indicated a high print for the bloc.
US manufacturing activity picked up in May as demand for goods remains strong, which could further allay fears of an imminent recession, but a measure of factory employment contracted for the first time in nearly a year. The Institute for Supply Management (ISM) said on Wednesday that its index of national factory activity rebounded to a reading of 56.1 last month from 55.4 in April. A reading above 50 indicates expansion in manufacturing, which accounts for 12 per cent of the US economy. Economists polled by Reuters had forecast the index falling to 54.5. The survey followed a report last Friday showing consumer spending increasing strongly in April.
The Biden administration on Wednesday said that it would pursue negotiations to strengthen trade and technology ties with Taiwan, a move that is aimed at countering China’s influence in the Asia-Pacific region and one that is likely to rankle Beijing. The announcement follows the administration’s efforts to build an Asia-Pacific economic bloc, known as the Indo-Pacific Economic Framework, that includes 13 countries and excludes Taiwan. China claims the island, a self-governing democracy that is critical to global technology supply chains, as an incontestable part of its territory. While Taiwan expressed interest in becoming a full member of the Indo-Pacific framework, that prospect was deemed too controversial by many participating countries.
The Biden Administration on Wednesday (Jun 1) will announce US$2.1 billion in new funding to bolster food supply chains, including initiatives to expand small- and mid-sized processing plants, according to a US Department of Agriculture (USDA) official. Funds will also be used to finance new infrastructure such as cold storage facilities and to assist farmers shifting to organic production, the official said. A nationwide shortage of baby formula following the shutdown of a single Abbott Labs production facility, empty grocery shelves during early phases of the Covid pandemic and soaring food prices over the past year have underscored weaknesses in the country’s food supply chains.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
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Date: 30 May 2022
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