Global equities rallied last Thursday and Friday as the Federal Reserve finally made the decision to lift the interest rate by 25 bps, bringing certainty and confidence to investors.
Right now, the probability of June and September rate hikes stands at 53% and 80% respectively, showing that the market expects another two hikes by the end of 2017.
The dollar index slid for a fourth consecutive day to the 100.0 area, contrary to the theory that the rake rise would result in a stronger currency. Possible explanations could be profit-taking activities and Trump’s influence on the dollar. The US President has mentioned many times that he thought a strong US dollar is ‘too strong’, and is ‘killing us’.
The weak dollar fuelled the rally of commodities. Gold, silver, copper, corn and cotton rebounded sharply from the recent lows. WTI crude oil, however, continued to consolidate at around US$48 per barrel on rising glut concerns, with the recent US rig count number continuing to climb.
Separately, Singapore’s non-oil domestic exports (NODX) surged 21.5% year on year in February, showing that external demand is picking up for a fourth consecutive month. The NODX of all 10 major markets increased, led by China (+65.1%), the EU (+28.7%) and Taiwan (+54%).
The Straits Times Index (STI) is now trading at its highest level since August 2015, reflecting an improvement in fundamentals and rising commodity prices. The valuation of STI, measured by the trailing price-to-earnings ratio, is now at around 13 times, which remains one of the lowest among its Asian peers.