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From: NetResearch Asia
Sent: Monday, June 17, 2013 9:59 AM
To: NetResearch Asia 17 Jun 2013
Subject: The Federal Reserve’s policy meeting takes centre stage this week
DJIA: 15070.18 -105.90
Nasdaq Composite: 3423.56 -21.81
Good morning, fellow investors
US market ended a volatile week in the red last Friday following mixed
economic reports and as investors remained on the edge over the magnitude
and timing of the Federal Reserve’s (Fed) potential move to taper monetary
stimulus. The three major stock indices lost between 0.6% and 0.7%.
US consumer sentiment retreated in June, with the University of Michigan's
preliminary reading on consumer sentiment index falling to 82.7 in June,
below expectations of an unchanged reading of 84.5 as reflected in May,
showing signs of fading optimism pertaining to employment and housing.
However, the June reading was still the second highest in the last eight
months, suggesting that consumers are still not too pessimistic about the
long-term prospects of the US economy. Separately, US producer prices rose
more than expected rising 0.5% in May, higher than expectations of a rise
of 0.1%, from a decline of 0.7% in April, led by a rebound in food and
gasoline prices. However, wholesale prices, excluding volatile food and
energy costs, ticked up a mere 0.1% for the second consecutive month and in
the 12 months through May, core PPI advanced 1.7% after rising by the same
margin in April and March, indicating that underlying inflation pressures
remained muted, and that bodes well for the Fed to hold back moves to scale
back monetary stimulus.
On a weaker note, US factories barely increased their output edging 0.1%
MoM higher in May, after two months of decline - falling 0.4% in April and
0.3% in March - a sign that the manufacturing sector is providing little
support for the economy.
Also contributing to the weak sentiment was the International Monetary
Fund’s (IMF) downward revision to US economic growth forecast to 2.7% for
2014, from the previous forecast of 3.0%, as the economy is restrained by
government spending cuts. The sequester cuts, aimed at closing the US
deficit, had already taken up about 1.75% points from 2013 growth which the
IMF is maintaining a growth forecast of 1.9% and is expected to slice off a
further US$109 bil in spending in the coming fiscal year.
On the corporate front, Smithfield Foods, which recently announced it was
bought by Chinese meat producer Shuanghui International, dipped 0.03% after
the firm announced earnings decline of 69% to US$29.7 mil, or 21 UScents
per share, in the quarter ending April 28 as a result of high grain prices
due to last year's drought, which pushed up the cost of hog production.
Also, Time Warner Cable shares jumped 8.1% on speculation the cable company
could merge with Charter Communications. However, there are reports that it
is unlikely that the deal will go through.
All the three major indices closed the week lower, with Dow Jones
Industrial average losing 1.17% while the S&P 500 fell 1.01% to close at
1626.73. The Nasdaq lost 1.32% for the week.
All eyes will be on the Fed’s two-day policy meeting ending on Wednesday as
investors parse the Fed Chairman’s speech on the central bank’s policy
moves, although market is not expecting any major changes in policy to be
announced. In fact, many in the market are not expecting the Fed to taper
its bond-buying program until December 2013. Besides the Fed’s monetary
moves, market will focus on the health of the US economy, looking
particularly at the housing, manufacturing and jobs markets. Investors will
look to data on housing starts and building permits due on Tuesday,
followed by MBA mortgage index on Wednesday and existing home sales on
Thursday for continuous growth momentum in the US housing market. Market
will also look for clues on the manufacturing sector, where performance has
been sluggish due to weak export demand, through an Empire manufacturing
report due tonight as well as on the US employment conditions through the
jobless claims report on Thursday.
Crude oil for July delivery added US$1.16 a barrel, or 1.20%, to settle at
US$97.85 a barrel last Friday and for the past week, crude oil for July
delivery gained US$1.82 a barrel, or 1.90%.
In Singapore today:
Singapore market benefitted from a short-covering bounce last Friday pacing
overnight rally on Wall Street, as strong retail sales and low unemployment
claims lifted confidence that the US economy is sufficiently resilient to
withstand scaling back of monetary stimulus from the Federal Reserve.
However, the rebound came on low volumes, signalling a lack of conviction
in the sustainability of last Friday’s advance. At closing, the STI index
advanced 30.74 points, or 0.98%, to close at 3161.43 points but for the
past week, the benchmark index lost 23.29 points, or 0.73%.
Starhub announced plans to upgrade its mobile network that will see its 4G
network hit 95% coverage of the country at street level by October, up from
75% currently. Since April 212, the firm has also been upgrading its
dedicated fibre transmission backbone to support a connection of up to one
gigabit per second to each base station. Collectively, the total capex from
these upgrading programs are expected to amount to about 13% of its
operating revenue.
Expect lackluster trading at the start of the week as investors are likely
to err on the side of caution ahead of the Fed’s policy meeting followed by
speech this Wednesday amid concerns over the paring back of the central
bank’s bond-buying program.
Clarification on Market Close on 14 June 2013 –
With reference to Market Close on 14 June 2013, we would like to clarify
that the STI index closed at 3161.43 points (instead of 31761.43 due to
typo error).
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....
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12:26 PM (3970 days ago)
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