Date: March 18, 2024
- Major US indices closed flat despite adverse CPI and PPI data
- Probability of rate cut next week only 1%; market expects first cut in June
- STI rose 0.8% to 3,172.96; Friday’s volume highest for the year
- Economists have raised S’pore’s growth forecast for 2024 to 2.4%
- No plans to sell Optus: Singtel
- No Signboard resumed trading, outlined plans and announced share consolidation; shares plunge 45%
US stocks proved resilient to adverse inflation data
Possibly the most significant external feature of trading last week was how resilient US stocks proved to be to adverse inflation data.
The first indication of this came on Tuesday all three major indices continued to rise to new highs despite higher-than-expected consumer price data which suggested that interest rates won’t be cut anytime soon.
The second came on Thursday when they registered only modest falls after a hotter-than-expected producer price index data that came together with a lower-than-expected rise in retail sales which pushed the US 10-year Treasury yield up 0.106% to 4.297%.
How Wall St fared
Falls on Thursday and again on Friday ensured that the three major US indices recorded mixed performances for the week – the Dow Jones Industrial Average and S&P 500 were mainly flat over the five days whilst the Nasdaq Composite Index lost 0.7%. However, the S&P 500 has notched 17 new highs already this year, the highest since 1998.
Friday was triple witching day, which refers to the simultaneous expiration of stock options, market index options and market index futures. The event can lead to higher volatility and more trading volumes, giving speculators an opportunity for quick arbitrage opportunities.
It happens four times a year – on the third Friday of March, June, September and December – with much of the increases in activity taking place during the last hour of trading, otherwise known as the “witching hour.”
The STI rose 0.8% for the week, Friday’s volume was highest for the year
The most significant internal feature of the week was that on Friday, volume spiked up to 3.02b units worth S$2.31b, the highest both in unit and dollar terms this year. The dollar amount surpassed the S$2.06b done on 29 February, whilst the unit figure beat the 2.24b traded on 21 Feb.
Most of the surge in volume came from Thai Beverage, which lost S$0.005 at S$0.50 with 440.2m shares traded. The dollar value of this was S$220m, placing it second in the value list to DBS.
On Friday, the STI fell 13.44 points to 3,172.96, though it managed a gain of 25 points or 0.8% for the week.
Also probably enabling the STI to keep some distance from the 3,100 level that it looked in danger of falling below early in the week was news that private sector economists have raised their forecasts for 2024 economic growth to a median figure of 2.4%.
US inflation still appears to be a problem – but not for stocks
Inflation has come a long way from its post-pandemic highs, but a clear trend toward the Federal Reserve’s 2% annual target remains elusive.
The latest Consumer Price Index (CPI) report published on Tuesday showed steps forward in some areas and back in others, presenting an overall muddled picture that leaves both the hawks and the doves with plenty to grasp onto. There’s little clarity regarding the Fed’s interest-rate trajectory in 2024.
The Consumer Price Index increased 0.4% in February, faster than the 0.3% rise in January and 3.2% higher than a year ago, according to the Bureau of Labour Statistics.
The core CPI, which excludes food and energy components, also increased 0.4%—matching the January pace. The annual change fell to 3.8%, from 3.9%.
The CPI’s yearly rise has dropped from a peak of 9.1% in June 2022—which was the highest U.S. inflation since the early 1980s—into the 3% range, but that last push toward the Fed’s 2% annual inflation target is taking some time.
On Thursday came news that the producer price index (PPI) increased by 0.6% in February, double the consensus estimate of economists. And retail sales rose by 0.6% in February from the month prior, below expectations for a 0.7% increase.
Probability of cut next week only 1%; market expects first cut in June
Interest-rate futures pricing moved on Tuesday to further reduce the already-slim implied odds of rate decreases at the Fed’s March and May policy meetings.
By the end of the week, according to the CME FedWatch Tool, the federal funds futures market was pricing in only a 1% chance of a rate cut at next week’s Federal Open Markets Committee meeting and 7 in May but rising to 53% in June.
Economists have raised S’pore’s growth forecast for 2024 to 2.4%
Private economists marginally raised their forecast for Singapore’s 2024 economic growth and lowered their expectations for headline inflation, in the latest quarterly survey of professional forecasters published by the Monetary Authority of Singapore (MAS) on Wednesday.
In the survey, the median forecast for growth in 2024 was 2.4%, up marginally from the previous survey’s forecast of 2.3%
Headline inflation in 2024 is now expected at 3.1% – down from 3.4% in the prior quarter’s survey – while the forecast for core inflation stayed unchanged at 3%.
The government expects GDP growth to be between 1 and 3% in 2024, and both headline and core inflation to be between 2.5 and 3.5%.
The latest survey was sent to 26 professional forecasters on Feb 15, and received 23 responses. The survey reflects their views and not those of MAS.
No plans to sell Optus: Singtel
Singtel on Wednesday halted trading of its shares in order to clarify that there was “no impending deal to offload Optus for the said sum” of A$16 billion, as had been reported by the Australian Financial Review.
“Optus remains an integral and strategic part of the Singtel group and we are committed to Australia for the long term,” said Singtel. “Our current focus has been on improving network resilience and conducting a CEO search (for Optus).”
The group added that it regularly conducts strategic reviews of its portfolio to “optimise the value of (its) assets and businesses and will explore all options to maximise shareholder value”.
Prior to the trading halt and announcement, Singtel’s shares had risen later to S$2.48, up S$0.09 or 3.8 per cent, with 71.4m shares traded where they remained until the end of the week.
Singtel’s emphasis on its CEO search for Optus comes in the wake of Kelly Bayer Rosmarin’s resignation in November 2023, after the Australian telecommunications network was hit by a network-wide outage affecting about 10 million of its customers.
Chief financial officer Michael Venter was appointed to fill in for Bayer Rosmarin as interim CEO amid Optus’ global search for a replacement.
No Signboard resumed trading, outlined plans and announced share consolidation; shares plunge 45%
Restaurant operator No Signboard resumed trading on Catalist on Friday after more than two years. Its shares ended S$0.014 or 45% lower at S$0.017 on volume of 7 million shares. Trading had been suspended since January 2022 as the company could not demonstrate it could continue as a going concern.
Earlier in the week at a dialogue session organised by the Securities Investors Association of Singapore (SIAS), No Signboard’s interim chief executive Lim Teck-Ean said the company is planning a six-to-one share consolidation.
Following the consolidation and issuance of shares to the company’s white-knight investor Gazelle Ventures, No Signboard’s issued share capital will stand at 300 million, executives said.
Mr Lim said organic growth is one priority, utilising the company’s existing brands in its portfolio and growing and restructuring these brands to make them profitable and streamlined.
Another priority is external growth, he said, which No Signboard’s board hopes to “ramp up in the next couple of years” in a bid to increase the group’s industry participation in different segments. The end goal, Lim added, is to ensure that No Signboard is “not just a local brand”.
The record date for the share consolidation will be 21 March at 5pm whilst trading in the consolidated shares will take place in board lots of 100 from 20 March.
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