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Trade Worries Take Back Seat Ahead Of Earnings Seasons
By: meisiew
Articles (10) Profile

Over the fortnight, the US and China slapped each other with trade tariffs on some US$34 billion worth of goods. In view of China’s retaliatory tariff, Trump escalated the trade war by threatening to impose further tariffs of 10 percent on an additional US$200 billion worth of Chinese imports. The new tariff threat sparked off another global selloff on 11 July 2018.

Escalating trade tensions took a backseat as investors turn their focus towards the earnings season, allowing global equities to take a breather. Over the past two weeks, the Dow Jones Industrial Average (DJIA) increased 2.9 percent to close at 24,924.89 while S&P 500 closed at its highest level at 2,798.29 since February. Technology stocks led the rally, sending the Nasdaq Composite to close at a record high of 7,823.92.

Led by US gains, Asian markets shook off some of the trade jitters and bounced back to pare losses. The Shanghai Composite Index closed 0.6 percent lower at 2,831.18 while the Hang Seng Index also closed 1.5 percent lower at 28,527.70. During the same period, Japan’s Nikkei 225 rose 1.3 percent to 22,597.35.

Meantime, Singapore’s Q2 GDP growth expanded at 3.8 percent and missed the 4.1 percent forecasts due mainly to the escalating US-China trade tensions. Manufacturing growth fell from 9.7 percent to 8.6 percent and services growth dropped 60 basis points to 3.4 percent. The construction sector contracted by 4.4 percent in the second quarter due to continued slowdown in private sector construction activities.

On 5 July 2018, the Singapore government raised the Additional Buyer’s Stamp Duty (ABSD) rates and tightening of loan-to-value (LTV) limits on second residential property purchases, aimed at moderating home price growth. In a knee-jerk reaction, the local benchmark Straits Times Index (STI) lost 2 percent the following day, with property and banking stocks succumbing to heavy selling and led declines. Hurt by the double-whammy of trade uncertainties and new cooling measures, the STI managed to recoup some losses but ended 0.3 percent lower at 3,260.35.

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