Shaky start to the STI this week
The stock market appears set for a shaky start this week after last week's relatively decent showing, with the results of Italy's referendum yesterday only to be known this morning and United States jobs data on Friday indicating that the Federal Reserve is probably still on track for a December rate hike.
Local shares may take their lead from the Dow's slight retreat last Friday after US unemployment fell to a nine-year low to 4.6 per cent in November.
Traders have priced in a roughly 93 per cent probability that the Fed will raise the interest rates at its Dec 13-14 meeting, based on data from options and futures exchange CME Group.
Optimism over a recovery in oil prices following an Opec agreement last week to curb production may also be short-lived, analysts caution.
Trading this morning will likely depend on the outcome of Italy's referendum on proposed reforms to streamline its Parliament.
The referendum is seen as a crucial indicator of the extent of the rise of populist, anti-establishment sentiment in the eurozone, coming in the wake of Britain's vote to leave the European Union earlier this year.
Italian Prime Minister Matteo Renzi has said he will resign if the "no" vote wins out.
Opinion polls thus far suggest that will happen, according to media reports, and that could trigger a general election.
But Asia may not benefit much from political turmoil there.
"Rising political risk in Europe is seeing funds flow to the US where companies potentially stand to benefit from lower taxes and regulation under Donald Trump," said CMC Markets analyst Jasper Lawler, in an AFP report.
The outlook for crude oil prices could be another dampener on local stocks.
Though Opec's deal to cut output last week sparked a rally in crude, the recovery may not have legs.
"The cut adds to confidence that we have seen the low in oil prices, and that deflationary forces are in retreat. So good news for energy producers and central banks," said AMP Capital chief economist Shane Oliver, on Saturday.
"But there is a danger in getting too excited. Around US$50 (S$71) per barrel is where the median shale oil producer is economic and so shale production will start to ramp up again (the US rig count is already well up from its lows) and it's questionable whether Opec discipline will really hold... so I am sceptical that the oil price will go too high. Maybe US$55 or US$60 tops."
A bunch of economic data will be released for major markets this week: China trade data, a European Central Bank policy decision and US initial jobless claims will be out on Thursday; Friday will see China inflation and US consumer confidence figures, along with oil rig count numbers that will be closely watched after Opec's agreement.
In local stocks, Singtel had a fairly major broadband Internet outage over the weekend that lasted roughly a day starting at about 8.45am on Saturday.
On Sunday morning, it said services had been fully restored as of 8.25am but it was still unable to pinpoint the exact cause, though it ruled out a distributed denial of service attack.
Singtel, which had a market capitalisation of about $61.4 billion as of Friday, was in late November fined $145,000 for two separate pay-TV disruptions. In 2014, it was fined a record $6 million for a 2013 fire at its facility that affected nearly 270,000 telecom and broadcast subscriptions for end-users ranging from government agencies to financial institutions and residential users.
This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts