Markets Overview - United Overseas Bank
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Monday, 15 February, 2021
Lee.SueAnn@uobgroup.com
Global Economics & Markets Research
Email: GlobalEcoMktResearch@uobgroup.com
URL: www.uob.com.sg/research
Markets Overview
HIGHLIGHTS AHEAD
The US financial markets will be closed on Monday (15 Feb) for US Presidents’ Day holiday while Canada will celebrate family
day on 15 Feb as well. The US corporate earnings calendar continues to be busy despite a shorter week with 52 S&P 500
companies reporting and the focus in our view will be on hotels and leisure companies. Post-Trump impeachment decision on
Saturday (13 Feb), the US House of Representatives and Senate will both be in recess for the week of 16-19 Feb but attention
will be on news relating to President Biden’s US$1.9 trillion stimulus plan and also on a House Committee on Financial Services
hearing on the recent US stock market volatility due to short-selling (19 Feb). There is again no central bank monetary policy
decision among the G7 this week but attention will be on be on the Federal Reserve as markets look forward to the release of
the January 2021 FOMC minutes (18 Feb, 3am SGT).
On Monday (15 Feb), the early focus will be on the Japan’s 4Q 2020 GDP which was better than market expectations, at 12.7%
q/q SAAR (Bloomberg Est 10.1% q/q SAAR, UOB Est +1.2%), from a downwardly revised +22.7% q/q SAAR in 3Q. The rest of
G7 economic data will be on Japan’s final December Industrial production & capacity utilization data, Eurozone’s December
industrial production and trade balance data, UK’s Rightmove house prices for February and Canada’s January housing starts.
For the rest of this week, the data focus will be the prelim February Private sector manufacturing and services PMI surveys for
developed economies which will be released on Friday (19 Feb). The manufacturing surveys are still expected to stay above 50
but services may fall further below the 50-mark further in Japan and Europe, amidst the resurgent COVID-19 pandemic in the
developed economies. The key exception is perhaps the US which saw resilient numbers (in the high-50’s) for both
manufacturing and services despite its COVID-19 situation while rolling out the vaccine program across the country.
And for the US, Other than PMI surveys, the US data calendar will be focused on prices, retail sales and housing data:
o US January PPI (17 Feb, Bloomberg Est: +0.5% m/m, 0.9% y/y from 0.3% m/m, 0.8% y/y in Dec)
o US January advance retail sales (17 Feb, Bloomberg Est +0.8% m/m, -0.7% m/m in Dec)
o US January industrial production (17 Feb, Bloomberg Est +0.4% m/m, +1.6% m/m in Dec)
o Initial jobless claims (18 Feb)
o Various housing data including NAHB February housing market index (17 Feb, Bloomberg Est 83, unchanged from 83 in
Jan), January building permits (17 Feb, Bloomberg Est -2.1% m/m from +4.2% in Dec), January housing starts (17 Feb,
Bloomberg Est -1.1% m/m, from +5.8% in Dec), January existing home sales (19 Feb, Bloomberg Est -3% m/m from +0.7%
in Dec).
As for the COVID-19 pandemic developments, Dr. Rochelle Walensky, director of the Centers for Disease Control and Prevention,
on Sunday (14 Feb) said it is too early for states to lift mask-wearing mandates given the high number of daily coronavirus cases
and deaths in the US. According to CNBC analysis of data from Johns Hopkins University, the US is reporting more than 93,000
cases a day on average, down 22% from a week ago, but more than 3,000 deaths daily, up 4% from a week ago. Year to date,
the US has deaths of more than 480,000 from COVID-19 with more than 27 million infected.
Singapore’s Prime Minister Lee Hsien Loong said that while the recovery is uncertain, he expects Singapore’s economy to
bounce back and that in economic terms “the year of the Ox should be better than the Year of the Rat”. Focus this week will be
squarely on Singapore’s FY2021 Budget announcement on 16 Feb 21 (Tues). And given the broader backdrop of strong CNY
and weak USD, the SGD is also expected to stay strong against the USD.
CENTRAL BANK OUTLOOK
In addition to the FOMC minutes, the central bank focus will be on several G7 (mostly Fed Reserve) central bank official speaking
in public forums. The Fed speakers include Fed Governor Bowman (16 Feb), Kansas City Fed President George (16 Feb), Dallas
Fed Kaplan (16 Feb), San Francisco Fed Daly (16 & 19 Feb), Richmond Fed Barkin (17 Feb), Boston Fed Rosengren (17 and
19 Feb), Fed Governor Brainard (18 Feb), Atlanta Fed Bostic (18 Feb). Key Bank of England officials speaking in public forums
this week include MPC members Ramsden (17 Feb) and Saunders (18 Feb).
Markets Overview
Monday, 15 February, 2021
1|P a g e Wall Street Journal reported (12 Feb) that the Federal Reserve said it would test the ability of the largest U.S. banks to weather
a hypothetical recession in which markets seize up and unemployment jumps above 10%. The so-called stress test, conducted
annually to see how banks would react to dramatic market and economic shocks, will feature a scenario in which a severe global
recession leads to "substantial stress" in commercial real estate and corporate debt markets, according to the Fed. In a "severely
adverse" scenario, unemployment rises by 4 percentage points to reach nearly 11% in the third quarter of next year, as gross
domestic product falls and asset prices drop sharply, including a 55% decline in equity prices.
FX
The US dollar was mixed against the major currencies on Friday (12 Feb) even as the US Dollar index (DXY) ended higher at
90.48 (from the previous close of 90.417). The euro was little stronger with the EUR/USD trading to an intraday range of 1.2135-
1.2082, before ending the NY session at 1.2120 (from 1.2113). The GBP/USD pair closed a tad higher to 1.3849 (from 1.3846).
The yen weakened slightly against the dollar and USD/JPY pair ended the day higher at 104.94 (from 104.75).
The Aussie and the kiwi dollar underperformed against the dollar with the AUD/USD ending lower at 0.7761 (from 0.7752) and
the NZD/USD was also lower at 0.7223 (from the previous day close of 0.7227).
Ahead of the Lunar Chinese New Year break, the onshore USD/CNY firmed up from 6.44 to 6.4583 before it ended pre-holiday
trade at the end of 10 Feb. However, amidst broader backdrop of renewed USD weakness, the offshore USD/CNH continued
trading and ended last Friday on 12 Feb back down towards 6.42.
In South East Asia, most Asian currencies strengthened anew ahead of their holiday break at the end of the 11 Feb session. As
a result, USD/IDR eased from 14,000 to 13,970, USD/MYR drifted lower from 4.05 to 4.04 and USD/THB pulled back as well
from 29.95 to 29.87. No surprises USD/SGD ended last Friday’s thin holiday trade firmly below 1.33 at 1.3260.
Overall the Asia Dollar Index (ADXY) stayed firm at 109.60 and amidst weaker USD undertone looks poised to strengthen further
for a renewed challenge of the 110 headline resistance once trading liquidity returns later this week after the extended Lunar
New Year break.
EQUITIES
US stock markets ended slightly higher to fresh records on Friday (12 Feb) even as investors weighed on concerns that the
February rally looked to be stalling. The Dow Jones Industrial Average (DJIA) ended up by about 28 points (0.1%) at 31,458.40
while the S&P 500 index was up by 0.47% to 3934.83. The NASDAQ was the best performer among the three major indices, up
by 0.5% on Friday to end at 14,095.47. The CBOE volatility Index (VIX) or “fear index” eased lower to 19.97 (from 21.25
previously).
Equities markets for most Asian countries had taken an early break for Lunar New Year and did not trade last Friday. These
included China, Hong Kong, South Korea, Singapore, Malaysia, Thailand, Indonesia and Philippines. India equity markets
remained open last Friday and the Sensex managed to make marginal gain of 0.02% to 51,544.
While most South East Asian equities market will return from the Lunar New Year break today (15 Feb 21), most North Asian
equities market will remain closed for the extended holiday. Taiwan and Vietnam will be closed till 16 Feb while China will be
closed till 17 Feb.
US TREASURIES/BONDS
US Treasuries fell and pushed yields higher on Friday (12 Feb) with the 10-year UST yield closing above 1.2% as investors
weighed the prospect of Biden’s fiscal stimulus and its impact on interest rates and inflation. The 10-year UST yield was up by
4.5bps to close at 1.208% while the 30-year bond yield closed higher by 6.4bps to 2.009%. The UST 2-year yield was unchanged
at 0.109% while the 5-year yield ended down by 3.3bps to 0.45%. The 2-year and 10-year yield spread steepened further (4.5bps)
to 110.4bps.
US Treasury cash markets will be closed on Monday (15 Feb) for US Presidents’ Day holiday. It will be a busy week for UST
auctions. The usual 3-month and 6-month Treasury bill auctions will take place on Tuesday (16 Feb) due to Monday’s public
holiday, followed by the usual 4-week and 8-week Treasury bills auctions on Thursday (18 Feb). The Treasury will conduct two
long-dated UST auctions, including US$27bn 20-year UST bond auction on Wednesday (17 Feb) and a US$9bn 30-year TIPS
auction on Thursday (18 Feb).
Ahead of the holiday break, local SG money market rates were unchanged at 0.21% for 3M SOR and 0.40% for 3M Sibor. While
10 year Singapore Government Securities (SGS) yield drifted lower to 1.02%.
Markets Overview
Monday, 15 February, 2021
2|P a g eCOMMODITIES
US and global crude oil prices rose further on Friday (12 Feb) due to rising geo-political tensions in Middle East. Meanwhile,
Baker Hughes reported that US firms added oil and natural gas rigs again for the 12th week in a row, with oil rigs up by another
seven to 306 in the latest week, their highest weekly gain in a month, while gas rigs were down by two to 90. The NY WTI ended
the session higher by US$1.02 (1.8%) to US$59.47, while the London Brent oil future closed up by US$1.29 (2.1%) to
US$62.43/bbl.
Gold price ended lower last Friday but still managed to locked in weekly gains for the first time in three weeks. It ended lower by
US$1.28 to US$1,824.23 per troy ounce on Friday (12 Feb) but was up by about US$10 compared to 5 Feb.
ECONOMIC NEWS & DATA
US Consumers' view of the economy slipped in early February as Americans were more downbeat about future business
conditions with the index of consumer sentiment lower at 76.2 in February, down from 79.0 in January, according to a University
of Michigan survey released last Friday (12 Feb).
The US Senate acquitted former President Donald Trump on Saturday (13 Feb) of inciting the mob that stormed the Capitol on
6 January, again sparing him from conviction in his second impeachment trial in a year. The Senate voted 57-43 in favour of
convicting the former president, but that fell short of the two-thirds majority needed to do convict Trump.
US Treasury Secretary Yellen said that in a G7 finance ministers’ meeting, she emphasized Biden administration’s commitment
to multilateralism, 'strengthening our alliances' and she urged G7 members to 'go big' on fiscal support to promote a robust and
lasting recovery. Yellen also pledged support for tackling climate change, and she told G7 colleagues to expect dramatic increase
in US engagement relative to Trump years, noting that US must play 'crucial role' in global climate effort.
New Zealand Prime Minister Jacinda Ardern on Sunday (14 Feb) announced a three-day lockdown in Auckland, New Zealand’s
biggest city, after three new local COVID-19 cases were reported.
Last Thursday, Malaysia reported that real GDP contracted by -3.4% in 4Q20 from -2.6% in 3Q20, bringing the full-year
contraction to -5.6% from +4.3% in 2019. On a seasonally adjusted quarterly basis, real GDP fell -0.3% q/q. The recovery path
hit a speedbump in 4Q20 amid the reinstatement of Conditional Movement Control Order (CMCO) to contain the spread of
COVID-19 infections. Despite the impact of MCO 2.0, the near-term impact is expected to be less severe given that most
economic sectors are allowed to operate. We keep our 2021 GDP growth target at 5.0%. For more details, kindly refer to Macro
Note: “Malaysia: Real GDP Declines 3.4% In 4Q20, Full-Year -5.6% In 2020” dated 11 Feb 2021.
In Singapore, focus shifts immediately to the FY2021 budget announcement by Fin Min, DPM Heng Swee Keat on 16 Feb 21
(Tue). For more details on what to expect for the budget, kindly refer to Macro Note: “Singapore Budget 2021 Preview: Charting
The Path To Recovery” dated 27 Jan 2021.
Ahead of the budget announcement, Singapore announced its final 4Q 2020 GDP print which recorded an improved reading of
3.8% q/q SAAR, -2.4% y/y in 4Q, from the advance estimate of 2.1% q/q SAAR, -3.8% y/y (versus +9.5% q/q SAAR, -5.6% y/y
in 3Q). For the full year, GDP contracted by 5.4% in 2020 (versus advance estimate of -5.8%), the first annual decline since
2001 and its worst recession since gaining independence. The Ministry of Trade and Industry maintained its official growth
forecast at 4.0-6.0% for 2021.
In his Lunar New Year comments on 12 Feb (Fri), Singapore’s Prime Minister Lee Hsien Loong noted that last year, Singapore
endured a steep -5% to -6% economic recession “particularly because we had a circuit breaker period which had a big impact
on activity”. This year “the bulk of Singapore’s economy should be able to bounce back” and that “the year of the Ox should be
better than the Year of the Rat in terms of the economy”. But he also warned that the economic rebound will be uneven with
some hard hit sectors like tourism, transport, aviation and construction “will take longer to recover”.
Also for today, we can expect 4Q20 GDP data for Thailand and Jan trade data from Indonesia.
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Disclaimer This publication is strictly for informational purposes only and shall not be transmitted, disclosed, copied or relied upon by any person for whatever purpose, and is also not intended for distribution to, or use by, any person in any country where such distribution or use would be contrary to its laws or regulations. This publication is not an offer, recommendation, solicitation or advice to buy or sell any investment product/securities/instruments. Nothing in this publication constitutes accounting, legal, regulatory, tax, financial or other advice. Please consult your own professional advisors about the suitability of any investment product/securities/ instruments for your investment objectives, financial situation and particular needs. The information contained in this publication is based on certain assumptions and analysis of publicly available information and reflects prevailing conditions as of the date of the publication. Any opinions, projections and other forward-looking statements regarding future events or performance of, including but not limited to, countries, markets or companies are not necessarily indicative of, and may differ from actual events or results. The views expressed within this publication are solely those of the author’s and are independent of the actual trading positions of United Overseas Bank Limited, its subsidiaries, affiliates, directors, officers and employees (“UOB Group”). Views expressed reflect the author’s judgment as at the date of this publication and are subject to change. UOB Group may have positions or other interests in, and may effect transactions in the securities/instruments mentioned in the publication. UOB Group may have also issued other reports, publications or documents expressing views which are different from those stated in this publication. Although every reasonable care has been taken to ensure the accuracy, completeness and objectivity of the information contained in this publication, UOB Group makes no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability relating to any losses or damages howsoever suffered by any person arising from any reliance on the views expressed or information in this publication. Markets Overview Monday, 15 February, 2021 13 | P a g e
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