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STI Stays Above 3,000; US Economic News Key Market Driver
Forward, Tradeable | 03 March 2014
By: Raymond Leung
Articles (142) Profile
By: Nicholas Tan
Articles (71) Profile

Markets remain jittery, though the Straits Times Index (STI) rose above the 3,100 mark and ended trading on Friday, 28 February, at 3,110.78, the highest level for the month of February, on news the Fed may alter course for reducing asset purchases should the US economy weakens.

Monday’s trading, 3 March, sees the STI dip below the 3,100 level as of morning trading, as worries that the tensions between the US and Russia over the Ukraine metastasises might escalate into a full-blown international political crisis.

As the 4Q13 earnings season is heading towards the end, this week we turn our attention to key economic events in the US such as the February Markit Manufacturing Purchasing Managers’ Index, Unemployment Rate and Non-farm Payroll.

Read on to find out more of what’s in store for the trading week ahead!

In Singapore…

• Feb Purchasing Managers’ Index

Market watchers will be watching February’s Purchasing Managers’ Index (PMI) closely following a swift rebound last month. In December, PMI fell into contraction (below 50) to 49.7 but rebounded back to expansion territory (above 50) in January to 50.5.

January’s PMI was largely boosted by the resurgence of electronic sector (PMI: 52.0). Economists believe the sector was a beneficiary of the recent political unrest in Thailand and an upturn trend which started in North Asia. Manufacturers in Singapore is expected to continue to benefit from the continuing unrest in Thailand.

General consensus expects PMI to remain in expansionary despite strong global headwinds as they remain confident in Singapore’s economy. Pharmaceutical and electronics are likely to give more support as higher production output was seen in the recent figures released by the Economic Development Board.

Around The World…
In The US…

• Feb Markit PMI – Manufacturing
• Feb Nonfarm Payrolls
• Feb Unemployment Rate

Markit’s manufacturing PMI will be released this week following last week’s disappointing “flash” service PMI. Growth for the service sector fell significantly (56.7 to 52.7) for the period of January and February but remains in expansion.

Analysts expect the manufacturing data to provide more support to the composite PMI (weighted average of service and manufacturing).
In the same week, crucial job data such as February’s non-farm payroll and unemployment rate will be released. Eyes from White House to Wall Street will be on these figures to gauge the performance of the newly appointed Fed chairwoman, Janet Yellen.

Pressure is high for Yellen to improve employment in the country as January’s payrolls fell way below consensus despite the five-year low in unemployment rate (6.6 percent). Such mixed results might be an indication that the public have given up on finding jobs due to tough employment market.

However, market rallied as the poor figures hit the streets (less likely for Fed to start taper). Investors should keep a close eye on these figures which represents the probability of a Fed tapering (Fed target: 6.5 percent unemployment).

Meanwhile In China…

• Feb HSBC/Markit Manufacturing PMI
• Feb Trade Balance USD

HSBC/Markit will be releasing their February PMI for the manufacturing sector which focuses on smaller companies in the private sector. For January, the sector shrunk to a seven-month low due to a slowdown in the economy that is likely to continue this month.

On the contrary, January’s trade balance performed stronger than forecast as surplus jumped 14 percent (from a year earlier). This jump eased market concerns regarding a slowdown in the world’s number two economy. However, economists expect both figures to fall for this month due to the extended period of holidays from Chinese New Year. Investors are cautioned against reading too much into these indicators for the month.

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This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

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