Welcome to this week’s edition of top stock market highlights.
US inflation
Prices in the US rose less than forecast in December, a signal that may cause the US Federal Reserve (“Fed”) to rethink its dot plot for interest rates.
This reading came after several months of faster underlying inflation and is a sign that higher interest rates could be effective in taming runaway inflation.
The core consumer price index (CPI) reading, which excludes food and energy costs, increased by 0.2% after posting four consecutive months of 0.3% increases.
The reason?
Cheaper hotel stays, more affordable medical care services, and moderate rent increases all contributed to the slightly lower CPI number.
Investors should note, however, that this is just one reading which indicates that inflation is cooling.
Officials at the Fed need to see a sustained pattern of lower CPI readings to reassure themselves that inflation has been truly brought under control and is trending towards the central bank’s target of 2%.
Last year, the Fed cut interest rates by a full percentage point with inflation still above its target, leading to the belief that the central bank may have cut rates too quickly.
A strong jobs report in early January means that policymakers are widely expected to leaves rates unchanged.
Should inflation continue to head lower with the economy staying strong, the Fed would have succeeded in engineering a so-called “soft landing”.
However, with President Donald Trump about to be sworn in on 20 January, economists are expecting his planned tariff policies to put upward pressure on inflation.
Should inflation rear its ugly head again and reverse course, the Fed may leave rates “higher for longer” or may even raise interest rates again to combat inflation.
Singapore treasury bills
The cut-off yield for the latest six-month Singapore Treasury bill (T-bill) fell to 2.99% from the previous 3.05% that was offered on 2 January.
This is based on auction results released by the Monetary Authority of Singapore (MAS) on 16 January.
For this auction, MAS received a total of S$18.4 billion of application monies for the S$7.2 billion of T-bills on offer, representing a bid-to-cover ratio of 2.55.
In comparison, the previous auction’s bid-to-cover ratio was at 1.99 for S$6.9 billion worth of T-bills on offer.
The median yield for the latest auction came in at 2.88%, down from 2.9% in the previous auction.
The government’s T-bill issuance limit is set to be raised to S$1.515 trillion, up from the S$1.065 trillion before.
This new limit will last till 2029.
Singapore’s key exports
Singapore’s non-oil domestic exports (NODX) for December 2024 grew 9% year on year, as shown by the latest data from Enterprise Singapore.
The rise in electronics and non-electronics shipments contributed to this performance.
This December rise was higher than the 3.4% recorded in November and also surpassed the estimates of a group of private-sector economists who had predicted a 7.8% year-on-year increase.
Based on seasonally-adjusted numbers, December’s NODX would have expanded by 1.7% in December to S$15.8 billion, making it two consecutive months of growth after November’s 14.7% rise.
Total shipments of electronic products climbed 18.6% for December, and was led by integrated circuits, personal computers, and disk media products.
Non-electronic shipments also did well, rising by 6.6% for December and reversing the 1.6% decline logged in November.
The NODX to eight out of Singapore’s top 10 key markets grew in December, with the only exceptions being China and EU 27.
The largest increase was the US, which recorded a 30.7% year-on-year increase.
Exports to Malaysia grew 24.2%.
Total trade increased by 19% year on year for December 2024, much better than November’s 4.9% year-on-year gain.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
