Business

More Trump bombshells may overshadow slew of macro data

There are no standout elements that could likely play a catalytic role in the local bourse this week although the release of some key macro data at home and abroad could provide some sway.

All that may be overshadowed by any more bombshells from the massive political turmoil in Washington.

After suffering its worst stretch this year over the middle of last week as one controversy after another engulfed the US presidency - including President Donald Trump divulging classified intelligence to Russia - Wall Street closed higher on Friday, displaying some resilience.

Some attributed the relief rally to the appointment of a special counsel to investigate Russia's role in last year's US election, a move that is seen as finally offering clarity on mounting doubts and unanswered questions over the Trump presidency.

Spoiler alert: Extreme volatility ahead, more so as recent events have also raised serious questions on the possibility of a presidential impeachment.

"It is becoming increasingly clear that the controversies blanketing Mr Trump have left investors jittery with most seeking concrete answers to what the future may hold. Markets may turn extremely sensitive moving forward and any additional news on this Trump episode should spark more volatility," said FXTM research analyst Lukman Otunuga.

According to DBS Bank chief investment officer Lim Say Boon, more correction should not be ruled out.

"The correction in global equities appears to have started.

"Don't panic though. We don't expect a meltdown. More like a 'drip, drip, drip' kind of slow melt - a necessary correction for technically overbought markets," said Mr Lim in a recent note in which he described US politics as the "convenient trigger".

"While it will be driven by political dynamics in the United States, the correction will likely be across all developed markets."

Other key events could demand investors' attention.

On Wednesday night, minutes from the Federal Open Market Committee's May policy gathering will be released.

Traders will scour the minutes for clues on whether the Fed will raise interest rates as early as June. The secondary print of US first-quarter gross domestic product (GDP) will also be released this week.

Another important event is the Opec (Organisation of Petroleum Exporting Countries) meeting on Thursday; most expect supply cuts to be rolled over until March, next year.

"Oil prices may be exposed to further volatility as the fierce tug of war between Opec bulls and US shale bears get underway. While most expect production cuts to be extended, it's more of a question on how US shale exploits this opportunity to pump more oil into markets.

"From a technical standpoint, investors will be paying very close attention to how prices react to the psychological US$50 (S$70) level," said Mr Otunuga.

The central banks of Thailand and South Korea will be holding their monetary policy meetings although no change in policy is expected.

Later in the week, Singapore is scheduled to release the final figures for first-quarter GDP performance.

IG market strategist Jingyi Pan said: "The final reading for Q1 GDP (growth) is expected at 2.7 per cent year-on-year, up from the 2.5 per cent yoy, and this positive outlook could help support the local bourse.

"This is in addition to further upsides that could be derived from any gains in crude oil prices. Good support for the STI can be found around 3200 levels.".

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

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