WORLDWIDE: HEADLINES
Singapore Tightens Monetary Policy To Fight Inflation, Growth Slows In Q1
Singapore’s central bank tightened its monetary policy on Thursday, saying the widely forecast move will slow inflation momentum as the city state ramps up its battle against soaring prices made worse by the Ukraine war and global supply snags.
The policy tightening, the third in the past six months, came as separate data showed Singapore’s economic momentum waning over the first quarter.
The local dollar jumped briefly after the Monetary Authority of Singapore (MAS) re-centred the mid-point of the exchange rate policy band known as the Nominal Effective Exchange Rate, or S$NEER, at its prevailing level. It also increased slightly the rate of appreciation of the policy band.
It was the first time in 12 years that the MAS used these two tools simultaneously to tighten policy, underlining policymakers’ worries about potential price instability which has seen the U.S. Federal Reserve set an aggressive path to tightening monetary conditions.
There was no change to the width of the MAS policy band.
“The war in Ukraine has driven global inflation forecasts higher and dented the outlook for growth,” MAS said in a statement.
“The fresh shocks to global commodity prices and supply chains are adding to domestic cost pressures,” it said, warning that inflation risks remain “elevated over the medium term.”
Singapore, a major travel and business hub, made its biggest reopening moves from the COVID-19 pandemic through late March and early April, easing local restrictions and allowing vaccinated travellers from anywhere in the world to enter without having to quarantine.
Full coverage: REUTERS
U.S. Consumers, Low-income Households Included, Still Spending, Bofa Research Says
U.S. consumer credit and debit card spending so far in 2022 is up 15% on a year earlier, Bank of America research showed on Wednesday, a sign that Americans’ gloom about the economy owing to high inflation has yet to translate into lower demand.
In fact, lower-income households – often described as the most vulnerable to an inflation-induced shock – are spending the most relative to their prepandemic outlays, the bank’s researchers found.
To be sure, Bank of America Institute researchers said some of that group’s spending will reflect high inflation, with March’s consumer price index registering an 8.5% year-over-year increase, the highest in over 40 years. Also, such households typically spend a higher share of their budgets on food, gas and utilities, which contributed most heavily to the CPI increase.
“But the level of card spending in this group is still way above pre-pandemic levels: the very latest Bank of America debit and credit card spending per household data shows card spending up 33.3% among the below $50K group in three years to the week of 9th April,” they wrote.
Card spending this year through April 8 was 15% higher than in the same period last year.
Surveys such as the University of Michigan’s widely followed Consumer Sentiment Index have painted a picture of U.S. consumers who are the most distressed about the economy in more than a decade, often a signal that they may rein in spending.
“But people don’t always actually do what they say they are doing – sentiment is not the same as action,” the bank wrote.
“The actual hard data does not support the gloom.”
Data from the Census Bureau due out on Thursday in fact is expected to show U.S. retail sales rose 0.6% in March from the month before, a Reuters poll of economists shows, which would mark an acceleration from February’s increase of 0.3%.
Monthly growth in retail sales averaged 1.4% over the 12 months through February, more than three times the rate that prevailed in the year before the pandemic.
Bank of America researchers attributed the ongoing strength in large part to the U.S. job market. The unemployment rate is 3.6% – roughly where it was before the pandemic – there are nearly two open jobs for every unemployed person and hourly wages are rising at their fastest in years, at an annual rate of 5.6%.
Full coverage: REUTERS
WORLDWIDE: FINANCE/BUSINESS
Asian Shares Track Wall Street Higher As U.S. Yields Stabilise
Asian shares tracked Wall Street higher on Thursday, while U.S. Treasury yields steadied and dollar retreated, as latest U.S. data raised hopes that inflation may be close to peaking, though several major central banks raised rates aggressively.
Traders were waiting for a European Central Bank meeting later in the day, to see if it was as hawkish as others have been.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.4% in early Asian trading, buoyed by a 0.5% gain in Australia’s resource-heavy shares (.AXJO) and a 0.6% advance in mainland China’s blue chip stocks (.CSI300). Japan’s Nikkei (.N225) was up 1.2%.
South Korean shares were an outlier on Thursday. The KOSPI index (.KS200) fell 0.4% as the central bank raised its policy rate to the highest since August 2019 in an unexpected move as it seeks to quell surging inflation.
Asian markets including Hong Kong, Singapore and Australia are on holiday on Friday for Easter, as are major European and U.S. markets.
“I think there are a couple of recent positive developments that could be boosting Asian shares today. Firstly, U.S. core consumer prices moderated… which could mean inflation pressures may start to abate soon in the U.S., and secondly, Chinese policymakers recently came out with more encouraging remarks about stabilising and supporting economic growth,” said David Chao, Hong Kong-based global market strategist at Invesco.
“I’ve argued that an upswing in money supply and credit growth could provide a floor for Chinese equities and signal that investor sentiment may soon start to improve, especially if COVID and geopolitical concerns start to wane.”
China’s cabinet on Wednesday flagged upcoming cuts to banks’ reserve requirement ratios (RRR) to support an economy battered by COVID-19 lockdowns.
Yields on U.S. Treasuries steadied in early Asian trade. The yield on 10-year Treasury notes was at 2.7120%, compared to an over three-year peak of 2.836%, before the U.S. data released on Tuesday showed inflation running less high than investors had feared.
The two year yield was 2.3727%, compared with a close of 2.3645% the previous day.
Full coverage: REUTERS
Dollar Soft After As U.S. Yields Pause
The dollar was on the back foot on Thursday after tumbling overnight, particularly against sterling and the euro, as U.S. yields paused their march higher, offering some relief to the bruised and battered yen.
Traders were also waiting for the European Central Bank meeting later in the day, to see whether they were in the same, more hawkish mood as their global peers.
“At the beginning of the week I was saying everything followed from the ongoing grind higher in U.S. yields, equities were off, the dollar was soaring, and now because of what’s happening in Treasuries, everything has reversed,” said Ray Atrrill global head of FX strategy at National Bank of Australia.
The benchmark 10-year Treasury yield was 2.7120%. It rose steadily earlier this month – driven by expectations of more aggressive Federal Reserve tightening to combat inflation – and reached as high as 2.836% on Tuesday, ahead of U.S. inflation figures.
However, while high, these were not quite as bad as some had feared, which observers said caused yields to pause.
The two year yield was also lower at 2.3604%.
The British pound rose to $1.3131 in early trade, its highest in a week against the dollar, after jumping 0.9% on Wednesday, its biggest daily percentage gain since June 2021, partly boosted by high inflation figures.
The euro too gained ground on the dollar, rising 0.54% on Wednesday, though fell against sterling
This left the dollar index which measures the dollar against six peers, at 99.818 after a 0.52% overnight tumble.
As well as the slow down in U.S. yields, Attrill said part of the moves could be explained by British CPI numbers coming in above expectations, “the money is flirting with the idea that the Bank of England could do 50 basis points in May – though we don’t expect that”.
The market was positioned for a hint that the ECB might draw a line under its quantitative easing programme in the second quarter rather than the third, said Atrrill.
“The risk is they are going to follow the path in terms of becoming overtly less dovish.”
Full coverage: REUTERS
Oil Markets Open Slightly Lower As Market Weighs Mixed Supply Signals
Oil futures were down slightly Thursday morning, after rising sharply in the first half of the week, as traders weighed a larger-than-expected build in U.S. oil stocks against tightening global supply.
Brent futures were down 38 cents, or 0.35%, at $108.38 a barrel, and U.S. West Texas Intermediate futures were off 58 cents, or 0.56%, to $10.65 a barrel at 0046 GMT.
Both contracts on Wednesday had shrugged off a large build in U.S. crude inventories to end the trading session roughly 4% higher. The jump in prices came as worries of more disruptions to global supply continued to rattle the market.
The International Energy Agency on Wednesday warned that from May onwards roughly 3 million barrels per day of Russian oil could be shut-in due to sanctions or voluntary embargoes.
At the same time, major global trading houses are also planning to curtail crude and fuel purchases from Russia’s state-controlled oil companies in May, Reuters reported on Wednesday.
Despite signals that global supply disruption will persist, oil stocks in the U.S. rose by more than 9 million barrels last week, the U.S. Energy Information Administration said on Wednesday, driven in part by releases from the nation’s strategic reserves. Analysts in a Reuters poll had anticipated just an 863,000-barrel build.
U.S. gasoline stocks fell 3.6 million barrels last week, far above anticipated levels, and distillate inventories also declined.
“Oil prices are looking very comfortable above the $100 level as U.S. and Chinese demand seems to be heading in the right direction,” wrote Edward Moya, a senior analyst with OANDA.
Full coverage: REUTERS
