Stocks Enter Correction as Rate-hike Fears Return

The dread that gripped equity markets earlier in the week re-emerged Thursday as US stocks plunged into a correction on concern that rising interest rates will drag down economic growth. The S&P 500 index plunged by 3.8% to 2,581.00. The Dow Jones Industrial Average loss 1,032.89 points (4.2%) to 23,860.46.

Fed’s Kaplan Says Market Volatility ‘may be a Healthy Thing’

Federal Reserve Bank of Dallas President Robert Kaplan said the recent financial market upheavals may actually be beneficial and he doesn’t expect them to have a negative impact on the economy. “More volatility in the markets, and maybe addressing some of the excesses and imbalances in the markets, by having a little more volatility, may be a healthy thing,” he said, adding that the preceding months of smooth sailing were “historically unusual.”

US Jobless Claims Decline, Approach An Almost 45-year Low

US filings for unemployment benefits unexpectedly declined last week, hovering close to an almost 45-year low and signaling a tight job market, Labor Department figures showed. Jobless claims decreased by 9k to 221k (est. 232k).

China Cautious on Pre-Brexit Trade Talks With UK, Envoy Says

The UK is pushing to solidify its future trading relationship with China, but Beijing is wary of providing any commitments until it sees how the Brexit deal plays out, according to a senior British trade official. The UK hopes to negotiate new trade deals or treaties with China “during the two year implementation period after March 2019,” Britain’s deadline for exiting the EU, Burn said. But “China will be cautious about making any commitment until they see what we have agreed with the EU on that.”

Carney Steps Up Bank of England Rate Hike Timetable for Brexit-hit UK

The Bank of England (BOE) lifted its forecasts for economic growth and said that inflation is projected to remain above the 2% target under the current yield curve, which prices in about three quarter-point hikes over the next three years. The governor noted that a key challenge is limited capacity.The BOE left its benchmark interest rate unchanged at 0.5%.

China Exports Hold Up as Commodities, Base Effects Boost Imports

China’s overseas shipments held up despite a stronger yuan and trade tensions with the US, while import growth surged reflecting calendar effects and higher commodity prices. Exports rose 11.1% yoy in January in dollar terms, while imports increased 36.9%, leaving a US$20.34bn trade surplus, the customs administration said. Economists said the data may be distorted by a later Lunar New Year holiday compared with last year.

Philippines Holds Rate With 2018 Inflation Seen Breaching Target

The Philippine central bank left its benchmark interest rate unchanged at a record low and forecast inflation this year will breach its target. Bangko Sentral ng Pilipinas held the overnight reverse repurchase rate at 3%, it said in a statement, as predicted by 12 of 17 economists surveyed by Bloomberg. Five forecast an increase to 3.25%.

Oil Sinks to Five-week Low as Investors Eye Charts for Direction

Oil spiraled to the lowest in five weeks as surging US crude supply coupled with technical indicators signaling the potential for further price declines. Brent for April settlement declined US$0.70 to US$64.81 a barrel.

Source: Affin Hwang Research - 9 Feb 2018