Loss in Dow futures drags STI down

Stocks weakened yesterday in response to a triple-digit loss in the Dow futures that came after the Trump administration on Friday failed to push ahead with its healthcare reform.

The failure has called into question the administration's ability to gain Congressional approval for the upcoming budget.

The Straits Times Index (STI) spent the whole day in the red before ending at 3,126.88, a loss of 16.02 points that came with a turnover of 3 billion units worth $1.08 billion.

There were 177 rises versus 285 falls, excluding warrants. At 5pm, the Dow futures was down 142 points.

Wall Street last week was shaken by worry that President Donald Trump would not garner sufficient support to repeal and replace existing healthcare legislation that was installed seven years ago by the previous administration.

The worry was that the same fate might befall his budget, which the stock market had been relying on when it rose almost non-stop since November.

President Trump has repeatedly said the budget will be "phenomenal" and will feature generous tax cuts and large infrastructure spending, promises which had driven Wall Street to several all-time highs this year.

Rabobank, in its comments yesterday, Very close but not close enough, noted that the Dow futures were in the red and warned that "the sell-off witnessed last week, when the S&P 500 plunged the most since the US presidential election, could be just the beginning of a deeper correction given that the defeat of the healthcare bill is likely to undermine market confidence".

However, although there is now worry over the budget, this is tempered by acknowledgement that resistance on this front is less as there is greater consensus on what needs to be done.

Whatever the case, the three banks underwent a mixed session with DBS and UOB weakening, while OCBC ended unchanged. Property stocks were mainly weaker, led by CapitaLand and City Developments.

TRADING HALT

In the second line, ISR Capital led the actives list with a $0.002 drop to $0.005 on volume of 121 million and RHT Health Trust was queried by the Singapore Exchange when its shares rose $0.035 or 4 per cent to $0.90 on volume of 1.2 million in the first minutes of trading prior to the company calling a trading halt.

Nomura, in its Watch for March data and US Risks, recommended investors reassess risks and rewards.

"We believe the extrapolation of the pace of improvement among global investors is beset with pitfalls - primarily that: (1) the Asian reflation is based on cyclical factors and base effects which will likely fade; (2) trade protectionism from the US administration is more likely than is assumed and; (3) investors have become extremely sanguine on China risks," said Nomura.

"All in all, it looks to us difficult to justify further gains based simply on this cyclical recovery."

CMC Markets in its morning commentary said technically, the US S&P 500 index has turned bearish, with the "SuperTrend" indicator flipped downwards and turned red for the first time since Nov 8.

"This suggests that the 'Trump rally' has probably come to an end, at least temporarily. According to the Fibonacci extension, 2,295 is likely to be a near-term support level, and 2,410 a near-term resistance level."

On Friday, the S&P closed at 2,343.98.

CMC also said the STI is facing strong selling pressure at around the 3,160 area, which is also its 61.8 per cent Fibonacci retracement level.

"The headwind from the US is likely to have a negative impact on Asian markets in the days to come, while markets also need some reason to take profit after three months of rallying."

This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts