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Dramatic Rebound After Disastrous Christmas

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Despite the persistent worries about a slowing global economy and a trade spat between Washington and Beijing, the US Federal Reserve concluded its final policy meeting of 2018 by raising the key interest rate and signalling to two more interest rate hikes in 2019, dashing investors’ hopes for a more dovish outlook.

Adding to their woes, Trump forced a partial government shutdown Democratic Senates refused to cave to Trump’s demand for funds to build a border wall. At the meantime, investors were also unnerved by speculations that Trump could be contemplating about the possible firing of Federal Reserve Chairman Jerome Powell.

However, latest strong retail sales data and reassurances that Powell would not be fired from the White House sent the Dow Jones Industrial Average surging more than 1,000 points for the first time in a single trading day, on 26 December 2018. Despite that, the dramatic rebound failed to recoup all the lost ground from the bruising before the Christmas Holiday. Over the fortnight, the US stocks still closed significantly lower, with the Dow closing 1,458.56 points lower or 5.9 percent down at 23,138.82.

For the two other major US indices, the broad-based S&P 500 shed 6.1 percent to 2,488.83, while the tech-heavy Nasdaq Composite Index slumped 6.9 percent to close at 6,579.49.

Asian markets tracked Wall Street losses with Nikkei 225 bearing the brunt of the losses, sliding 6.4 percent to close at 20,014.77. Meanwhile, Shanghai Composite Index fell 3.8 percent to 2,493.90, even after the People’s Bank of China said it would supply lower-cost liquidity for up to three years to banks, and is also willing to lend more to smaller companies. Over in Hong Kong, stocks were more resilient as the Hang Seng Index slid only 2.3 percent to 25,504.20.

On the local front, Singapore’s manufacturing output grew 7.6 percent year on year in November, beating economist’s estimates of 4.2 percent and also outstripping October’s 5.5 percent figure. Economists expect trade tensions between the US and China, but shaved their forecast for 2019 economic growth, according to the latest MAS poll. The survey also cited concerns of rising protectionism as the main big downside risk for the Singapore economy.

For the fortnight, the Straits Times Index closed lower by 0.8 percent at 3,053.43, closing above the 3,000-point psychological support level.

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