The SGX experienced mild turbulence last Monday as oil hit an all-time high of $135 a barrel but gained momentum to end on a high, following a Wall Street rally on Thursday. Nonetheless, Friday Dow Jones was a mixed bag of results – buying and selling forces tugged the index lower by 7.90 points.
Nasdaq rose for the fourth session in a row with Dell’s better than expected earnings and Apple’s iPod summer extravaganza. A Thursday report showed first-quarter US GDP growth was better than initially reported, in-line inflation and increase in personal income. Bad news is a weaker consumer sentiment and continued manufacturing slowdown.
Dark clouds are on the horizon (and I mean it literally, hurricanes are coming) which could mean $6 gas. Thus, I am not surprised to see crude oil prices bouncing back amid fears of disruptions to oil drilling and gasoline production.
If the hurricanes do their worst, naturally, we can expect oil futures to shoot through the roof. Lost output are not easily compensated as offshore oil pumps are limited and cannot be restarted immediately. Since hurricane season ends in late November, it is wise to be cautious but not over-react by exiting the market entirely due to such a prospect. I will provide another assessment after the China Olympic Games.
Meanwhile on the local front, the ST Index may test the 3200 barrier as I expect rampant speculation of oil to be kept in check, considering a probe by regulators into manipulation of the oil prices. The US banking sector is likely to gain a firmer footing in the coming months, even if the real economy is still in the doldrums. Check out this analysis. Consumption in overseas market are also making up for lackluster US domestic demand, as evidenced by the lively performance of tech stocks.
There may be some short-selling in the SGX on Monday due to profit taking but investors may take up fresh positions again in mid-week.