Date: January 13, 2025
- The Straits Times Index managed to regain and hold on to the 3,800 level
- DBS closed at new high above S$45 on Wednesday
- Weakness on Friday because of plunge in Dow futures
- Wall St on Friday tracked losses in the futures market after release of strong jobs report – all major indices down around 2% for the week
- Probability of no rate cut at 29 Jan FOMC is 97%, 30% for whole year
- US Fed is not sure where rates are headed: FOMC minutes
- SingPost: No guarantee that asset sales will go through
- Govt has reminded SingPost to uphold good governance
- Yanzijiang’s shares surge after BlackRock becomes substantial shareholder
A flat week for the STI, most rises and falls dictated by the banks
The Straits Times Index started the week at 3,801.83 and closed at 3,801.56 on Friday. In between it shot up almost 59 points on Wednesday driven mainly by the banks and when DBS crossed S$45 for the first time ever, but then it collapsed 61 points on Friday when the Dow futures fell deeply into the red ahead of the release of the US’s December jobs report.
For the week, DBS gained S$0.51 or 1.1% at S$44.13. UOB rose S$0.24 or 0.6% to S$36.82 and OCBC added S$0.53 or 3.2% at S$17.10.
All Wall St’s indices lost 2% over the week
As it turned out, the futures market got it right when Wall St fell sharply on Friday after a hotter-than-expected December jobs report had players wondering if the Federal Reserve is done cutting interest rates – the Dow Jones Industrial Average fell about 700 points, or 1.6%, S&P 500 dropped 1.5% and the Nasdaq Composite was down 1.6%.
For the week the Dow and S&P 500 fell 1.9% whilst the Nasdaq Composite lost 2.3%.
Surging bond yields weighed on stocks following latest economic releases
US Bond yields also surged, with the yield on the 2-year Treasury note up to 4.39%. The 10-year yield hit its highest since 1 Nov 2023 at 4.77%. The 30-year yield jumped to 4.96% and briefly crossed 5%.
On Tuesday, the US Job Openings and Labor Turnover Survey and the ISM services PMI both came in hotter than expected.
“The really big surprise in the report was the jump in the prices paid index to an eleven-month high of 64.4 in December from 58.2 — perhaps this reflects higher transportation costs or delivery charges in the holiday season,” said Rosenberg Research’s David Rosenberg in US newspaper Barron’s.
On Friday, US stocks tanked after the Labor Department said the U.S. economy added 256,000 jobs in December, which was well ahead of economist expectations at 153,000 jobs, according to FactSet. Unemployment also dropped to 4.1%.
Probability of no rate US rate cut is 97.3% for Jan, 30% for whole year
Wall Street is increasingly worried that the Fed might not cut rates at all again: Odds rates are held steady for the entire year ahead on Friday jumped to 30% from 13.4% on Thursday, according to the CME FedWatch Tool. That’s up from 5.2% a month ago.
Odds of a January interest rate cut were slashed from 8.6% prior to the data to only 2.7% now according to the CME FedWatch Tool. This means the market thinks there’s a 97.3% chance the Fed will keep rates on hold at its next meeting on 29 Jan.
Bond yields will likely continue driving the stock market this week, when updates on producer price and consumer price inflation headline a busy week of economic data.
US Fed is not sure where rates are headed: FOMC minutes
The minutes of the US Federal Reserve’s December Federal Open Markets Committee (FOMC) meeting suggested policymakers are unsure as to the path interest rates and inflation might take in the months ahead.
“Participants expected that inflation would continue to move toward 2%, although they noted that recent higher-than-expected readings on inflation, and the effects of potential changes in trade and immigration policy, suggested that the process could take longer than previously anticipated,” read the minutes, which were published on Wednesday afternoon.
“Several observed that the disinflationary process may have stalled temporarily or noted the risk that it could’’.
The FOMC voted at the Dec. 17-18 meeting to lower the federal-funds rate target range by a quarter of a percentage point, to 4.25% to 4.5%, for its third-straight meeting. Officials also signalled a slow and gradual pace of rate cuts ahead, due to lingering inflation, solid economic growth, and fiscal policy uncertainty.
“Many participants suggested that a variety of factors underlined the need for a careful approach to monetary policy decisions over coming quarters,” the minutes read. “These factors included recent elevated inflation readings, the continuing strength of spending, reduced downside risks to the outlook for the labor market and economic activity, and increased upside risks to the outlook for inflation.”
SingPost: No guarantee that asset sales will go through
SingPost said whilst it has been in discussions with various parties for the sale of its assets, there is no certainty that any transaction will arise.
“In particular, no definitive or binding agreement in relation to the sale of Famous Holdings has been entered into at this time,” said SingPost, who was clarifying a media report published the previous week.
In the report, Maybank Securities had said that the national postal service provider could offer a potentially “significant” special dividend after it completes a possible sale of two business units.
The research house was referring to SingPost’s proposed divestment of its Australian logistics business Freight Management Holdings and its potential sale of freight forwarding business Famous Holdings.
Maybank had said that the sale of Famous Holdings should conclude by end-January 2025, which should raise between S$80 million and S$100 million in proceeds.
Separately, SingPost reiterated that the proposed sale of Freight Management Holdings is subject to shareholders’ approval at an extraordinary general meeting that will be held in February.
Govt has reminded SingPost to uphold good governance
THE government last week issued SingPost an advisory to uphold proper corporate governance and processes after the whistle-blowing incident alleging falsification of international e-commerce shipment data.
Senior Minister of State for Digital Development and Information Tan Kiat How said in a parliamentary sitting on Tuesday that the government was concerned about the recent developments related to corporate governance and firings of senior executives in the public postal licensee SingPost.
“We are concerned with both the findings of the whistle-blowing incident and the subsequent dismissals, and are monitoring the situation closely to ensure that domestic postal services remain unaffected, especially during this period, where the new group chief executive officer has yet to be appointed’’.
Yanzijiang’s shares surge after BlackRock becomes substantial shareholder
Shares of China shipbuilder Yangzijiang Shipbuilding (YZJ) shot up S$0.13 or 4.4% on Wednesday following news that asset manager BlackRock has become a substantial shareholder in the company.
YZJ said BlackRock bought 10.8m shares at an undisclosed price, lifting its deemed interesth to about 203.2m shares or 5.14% from 4.87% previously. YZJ was one of the top performers in 2024, delivering a total return of 100.7%.
Investing with Insight: Watch this Week’s Technical Outlook
Subscribe to Newsletter
Subscribe to SIAS Mailing List and get updates to all upcoming events and news
By clicking submit, you agree to our privacy statement, collection, use and/or disclosure of your personal data to the extent necessary to provide you with this service.