Business

STI to be driven by upcoming bank results, earnings reports

Market sentiment seems to have entered a rather blithe phase even though investors have demonstrated the ability to be fickle. The Straits Times Index (STI) generally tracks the Dow futures closely, but sometimes it may change course.

Reactions to key events may be selective, as evident from last Thursday's session when the STI chalked up gains even as the Dow futures was down by more than 100 points at about 4.30pm.

The Singapore index was mainly supported by optimism arising from China's growth data and bullish views on banking and property stocks.

Mostly though, markets are typically driven by the strength of global growth, as head of Phillip Securities Research Paul Chew said.

Last week the S&P 500 climbed 0.9 per cent to 2,575.21.

Wall Street's positive vibes over the weekend, driven by renewed optimism over US President Donald Trump's tax cut plan, are likely to give Singapore equities a lift this week.

The strength of a rally by the STI may also hinge on the Reits and business trusts' earnings reports.

Market attention will be on bank results, namely that of OCBC Bank on Thursday, said Mr Chew, who added that globally, the European Central Bank meeting on Oct 26 will be the focus.

Expectations, he noted, are for some announcements at the meet to wind down quantitative easing in early 2018.

Ms Jingyi Pan, analyst at IG, believes a definitive view on market action in the week ahead may be difficult to formulate given the activities to come, although she did point out that US earnings seem to continue to fuel US equity markets.

EARNINGS SEASON

"Another 37 per cent of the companies on the S&P 500 will be delivering their reports in the coming week as we get into the heart of the US earnings season.

"Of the 16 per cent that have dished their reports thus far, we have certainly seen both sales and earnings surprise performance outshine last quarter's performance, keeping positive expectations rife and dips bought," she said.

Other key items from the West that are coming out in the week include October's preliminary Markit Purchasing Managers' Index from both the euro zone and the US.

But all eyes are probably glued to the US as investors try to decipher Mr Trump's leanings in his pick of the next US Federal Reserve chair that can come as early as this week.

If reports out there are any indication, Mr Trump has not yet made up his mind. So far, those in the running are Stanford economist John Taylor, Fed board governor Jerome Powell, current Fed chair Janet Yellen, former Fed governor Kevin Warsh and National Economic Council director Gary Cohn.

Closer to home, two key events ahead in Asia would be the announcement of Japan's snap election results and the conclusion of China's 19th National Party Congress.

"The expected result of an extension to Prime Minister Shinzo Abe's Liberal Democratic Party's rule would likely find little reaction with the result having been priced in. Meanwhile China's 19th National Party Congress remains under way until its Tuesday conclusion," said Ms Pan.

Other data to keep tabs on would be the economic and earnings releases from Asia, including Japan's September inflation number and South Korea's Q3 gross domestic product.

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

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