Business

Few reasons to deflate air of optimism

Prospects of rosy global economic growth fuelling rally in markets, and it is no different in Singapore

It may be too early to trot out the cliche "as goes January, so goes the year", but there is no mistaking investor exuberance.

The market started the year with a bang, and while there are two weeks still left to go before February, one would be hard pressed to find reasons to deflate the air of optimism among investors.

The prospects of rosy global economic growth have fuelled a rally in the world's financial markets, and it is no different at home. The Singapore bourse's key Straits Times Index is up a stellar 3.5 per cent so far this year at 3,520.56.

Going by Wall Street's record showing last Friday as the fourth quarter earnings season got underway, there are few reasons to hold back stock prices in the local bourse from powering on. The technical charts on the STI paint a bullish medium-term picture.

Chartists say the next resistance level is 3,547 - a high last seen in April 2015.

In the US, all three major stock indices rose to record levels, with the Dow Jones Industrial Average up 0.9 per cent, and the S&P 500 and tech-rich Nasdaq each rising nearly 0.7 per cent last Friday.

Several factors propelled the surge - including expectations that US tax overhaul will help lift corporate profits that are already at strong levels even without the upcoming tax booster.

Market watchers will be keeping an eye on corporate earnings this week while digesting the slew of macroeconomic data out of the world's largest economy.

Underlying US consumer prices saw their biggest jump in 11 months last month.

The latest data has prompted market watchers to reiterate that the US central bank will hike its benchmark interest rate three times this year after making similar hikes last year.

Solid retail sales data spurred by holiday spending released last Friday further affirmed positive sentiment towards the US economy.

For this week, the data docket is relatively sparse while the US stock market is closed today for a public holiday.

Significantly, the last of China's economic data for last year is due, pointed out Moody's Analytics.

It expects China's December-quarter gross domestic product (GDP) growth to hit 6.8 per cent year on year, unchanged from the third-quarter's pace - this would bring full-year GDP growth to 6.85 per cent last year.

While ongoing reform drive has been slowing down domestic demand, its overall economic growth has likely remained resilient in Q4 2017, said Julius Baer economist Susan Joho.

Looking ahead, she expects a mild cooling of overall economic growth for the first quarter of this year after a relatively strong last year for China.

The United Kingdom will update markets with inflation, retail sales and a string of other data, while Singapore's non-oil domestic exports (Nodx) will be released on Wednesday.

"We expect (Singapore's) Nodx to have continued to grow in December, but the momentum should have slowed down. Import demand from major trading partners such as Korea and China remains firm. Industrial production in Q4 continued to expand, albeit at a slower pace," said HSBC Global Research.

It expects export expansion to continue to drive GDP growth.

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BUSINESS & FINANCE