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Latest Market Update

20 September 2019
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Market Snapshot

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The month of September kicked off on a positive note with some respite from the trade spat between US and China after President Trump said that both countries are back on the negotiating table.1 Deputy–level meetings will take place in September to pave way for high level talks set in October. Trump has also announced to delay the significant 1st Oct tariff increase on $250 billion worth of goods by two weeks as a gesture of goodwill, as the date marks the 70th anniversary of the founding of the People's Republic of China.2

Global supply chains shift as trade war sees no end in sight. Google recently joined more than 50 other big names such as HP, Dell & Nintendo to shift part of their production base out of China and into emerging economies within Southeast Asia, with Vietnam and Thailand being the top beneficiaries. That's in addition to the thousands of smaller companies leaving China due to higher wages and ongoing trade tensions.3

Second Fed rate cut in the works? On the Monetary policy front, Federal Reserve is due to meet on the 17–18th September where Chairman Jerome Powell signaled that the central bank is likely to cut interest rate for a second time this year to support the economic expansion in the United States. This is on the back of lower–than–expected jobs report which showed that hiring has slowed though unemployment rate remained unchanged at 3.7%.4

European Central Bank, under outgoing President Mario Draghi relaunched its QE measures to combat stubbornly low inflation, which remained well below the target of nearly 2%. While Draghi initially faced increased resistance from the ECB committee on the need for relaunching asset purchases, he managed to deliver a 10–basis cut to the already negative deposit rate to -0.5% and will begin buying 20 billion euros worth of securities a month starting from 1st November . 5

Brexit saga continues. Newly sworn–in British PM Boris Johnson appears determined to do whatever it takes to uphold his campaign promise which is to deliver Brexit by 31st October , deal or no deal.6 Following a controversial move to suspend parliament until 14th October , effectively leaving lawmakers little time to act ahead of the 31st October deadline, Boris faced a series of setbacks including losing the vote to call for early general election for the second time and with Parliament enacting a law forcing him to ask EU for a delay if there is no deal in place.7

China producer price index (PPI) declined 0.8% in August compared to a year earlier and widening from a 0.3% decline seen in July.8 It also marks the worst year–on–year contraction since August 2016 as companies in China slash prices to win new orders or scale back production to contain costs. Amidst the continued slowdown and trade tensions, the PBOC cut banks' reserve requirement ratio (RRR) for the seventh time since early 2018 and the third time this year to free up close to 900 billion yuan (US$126.35 billion) in liquidity to shore up the economy.9 Still, the Chinese stock market is up more than 8% since last month and more than 30% since the start of the year.

Street protests continue to rage on in the city of Hong Kong despite the formal withdrawal of the controversial extradition bill on 4th September, threatening to plunge the economy into recession.10 However, markets have reacted positively to the news and Hong Kong's Hang Seng index is up almost 3% since then.

Gold Futures touched its six–year high late last month, closing at US$1,560 an ounce before declining slightly following stimulus measures and recent progress on trade talks.11 While gold prices may continue to rise in the medium term, in the short term, gold appears overbought.12

Oil prices spiked more than 10% following coordinated strike on Saudi Arabia's oil facilities, impacting more than 5% of global oil supply. State oil giant Saudi Aramco said the attack cut output by 5.7 million barrels per day but exports will continue as normal this week while the kingdom taps stocks from its large storage facilities. While investigations are ongoing, the U.S is pointing fingers at Iran.13 Before the attack, there were reports that Trump discussed easing sanctions on Iran. The report also said that Trump's National Security Adviser John Bolton, who recently resigned, was against lifting sanctions.14 Expect more volatility ahead for oil prices in the coming weeks.

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All information here is for GENERAL INFORMATION only and does not take into account the specific investment objectives, financial situation or needs of any specific person or groups of persons. Prospective investors are advised to read a fund prospectus carefully before applying for any shares/units in unit trusts. The value of the units and the income from them may fall as well as rise. Unit trusts are subject to investment risks, including the possible loss of the principal amount invested. Investors investing in funds denominated in non-local currencies should be aware of the risk of exchange rate fluctuations that may cause a loss of principal. Past performance is not indicative of future performance. dollarDEX is affiliated with Aviva but dollarDEX does not receive any preferential rates for Aviva products as a result of this relationship. Unit trusts are not bank deposits nor are they guaranteed or insured by dollarDEX. Some unit trusts may not be offered to citizens of certain countries such as United States. Information obtained from third party sources have not been verified and we do not represent or warrant its accuracy, correctness or completeness. We bear no responsibility or liability for any error, omission or inaccuracy or for any loss or damage suffered by you or a third party (including indirect, consequential or incidental damages) arising in any way from relying on this information.

This information does not constitute an offer or solicitation of an offer to buy or sell any shares/units.
This article has not been reviewed by the Monetary Authority of Singapore.

Information is correct as of 20/09/2019.