The US dollar remains supported above the key 94 handle, while US 10yr Treasuries recovered to the 2.40% handle. Gold continues to show resilience above $1,260/Oz, while oil gained for a fifth straight week but showed signs of exhaustion at the $58/bbl mark.
• The Dollar Index declined for the first week in three last Friday, but still managed to hold above the 94 level. The bias remains to the upside following the breakout of its downtrend channel in end-October. A renewed push at the 95 handle is expected over the near-to-medium term, with the 96 resistance a possibility by year-end.
• Key events this week that could move the dollar include speeches from Fed officials, US CPI data, as well as the ongoing negotiations between the House and Senate regarding the US tax reform bill.
• With a month to go to the widely-expected Dec. 13 Fed hike, the third this year, investors will be focusing more on the future rate-path trajectory and 2018 outlook, with the rate-hike itself more or less being priced in already.
• The benchmark 10yr Treasury yield recovered to the 2.40% mark Friday, and is likely to trade around it for the coming week. A retest of the 7-month high of 2.475% is possible.
• Wednesday’s inflation data will be key in determining 2018’s tightening path by the Fed. A big miss will almost certainly result in a decline back to the 2.30% mark.
• According to Morgan Stanley, the probability of a December hike could head toward 50% (currently 97%) should October CPI data this week come in much lower than expected.
• The CPI report for September showed weaker-than-expected price gains even with the disruption wrought by hurricanes. The core measure that strips out volatile items like energy and food prices has remained stubbornly below 2% since April, and the consensus estimate is that the report for October will show it holding steady at 1.7%.
• Spot gold ended higher for the week ended last Friday for only the second time in the past 9 weeks, and continues to remain resilient above the $1,260/Oz support. The 200-day moving average at $1,264/Oz provides additional impetus for gold bulls to add to their positions around those prices.
• A break below $1,260/Oz could lead a triggering of stops and a swift decline back towards the $1,200/Oz handle.
• A big miss in inflation data and/or a lack in progress on the US tax reform may push bullion prices higher towards the $1,300 resistance.
• Crude oil futures pushed higher for the week ended last Friday, gaining for the fifth consecutive week. The rally has somewhat hit a wall as of late, failing to breach past the $58/bbl mark last week.
• Further consolidation is expected between the $56/bbl and $58/bbl handles this week, although the momentum remains firmly on the upside.
• Over the weekend, the energy ministry of Saudi Arabia was cited to have raised security at its crude facilities after Bahrain blamed Iran for a fire at a pipeline that connects the two Arab allies.
• According to data from ICE Futures Europe, hedge funds raised their Brent net-long positions by 2.4% to a record 543,069 contracts in the week ended Nov. 7.
Upcoming Key Events:
• Donald Trump wraps up his first official trip to Asia as U.S. president.
• Republicans in the House and Senate continue to push forward with plans to design tax-overhaul legislation.
• Fed officials such as Yellen, Evans, Brainard, Mester, Kaplan and Williams are scheduled to speak this week.
• On the economic data front US inflation, China fixed asset investment, retail sales & industrial production, UK inflation &employment data, Australian jobs data and Canadian inflation numbers are all due for release this week.
• An ECB panel in Frankfurt will take place this week as well, and central bankers such as Draghi, Yellen, Kuroda and Carney are all expected to attend.
Weekly Thematic News:
Alibaba Group Holding Ltd.’s Singles’ Day generated a record 168.2 billion yuan (or $25.3 billion) in sales, as the e-commerce giant worked with more traditional retailers to market discounted lobster, iPhones and refrigerators to shoppers from at least 225 countries and regions. The annual frenzy posted a 39% increase in sales, exceeding Citigroup Inc. estimates and defying concerns of an economic slowdown. About 90% of transactions were done via mobile. At its peak, the company’s processors handled 256,000 transactions per second.
According to an S&P report, this weekend’s record online spending puts the industry on course for a 20%-25% annual growth over the next 12-24 months, as online shopping becomes increasingly popular in lower-tier cities and rural areas.
Investors who wishes to capitalize on this trend can buy into the China Online US portfolio on iAdvisor, which consists US-listed e-commerce stocks domiciled in China, and has returned a stellar 63.5% year-on-year.
Smart Real Estate Singapore:
Singapore property stocks have outperformed the benchmark index’s 19% gain in 2017, with developers such as City Developments Ltd. and UOL Group Ltd. both advancing 47% each. En-bloc sales, or redevelopment deals, have exceeded S$5 billion this year, the most since 2007, according to OCBC, and home prices rose for the first time in 4 years in September. Investors looking to invest in the local real estate sector can buy into the Smart Real Estate Singapore portfolio on iAdvisor, which has returned a healthy 28.7% from a year ago and provides a dividend yield of 4.8%.
Waymo, the autonomous car unit of Google parent company Alphabet Inc., said last week it will soon start chauffeuring people in minivans without “safety drivers,” staffers that man the steering wheel. For almost a decade, self-driving cars have graced public roads, but always with a person behind the wheel. The move, a first for any company, is a major milestone for the internet giant’s bid to lead the crowded pack trying to commercialize driverless technology. The Alphabet arm has racked up more autonomous test miles on roads than others developing the tech, including Ford Motor Co. and Uber Technologies Inc.
The Self-Driving Car US portfolio on iAdvisor has been one of the top 5 performers over the past year, returning an impressive 45.0% from a year ago.
According to a Bloomberg Businessweek article last week, the kind of cyberattack that companies will finally take seriously is coming. Security experts call such an attack a cyberphysical, meaning it spills into the real world, causing property damage and perhaps deaths. It happened in western Ukraine two years ago. The attack used malicious software to briefly take out an electrical grid, causing a blackout that affected several hundred thousand people.
So far, most Americans and Europeans haven’t been forced to deal with the dangers of a large-scale cybersecurity breach. Although close to half of the US population had their personal data stolen from Equifax Inc. recently, the usual round of press outrage and congressional finger-wagging didn’t yield any serious charges.
Experts have recently found evidence that hackers responsible for Ukraine’s outages have been quietly rolling into the systems that run US energy grids. On Oct. 20, government officials issued an alert warning of a “multistage intrusion campaign” aimed at industrial control systems in critical infrastructure, including in “energy water, aviation, nuclear and manufacturing sectors”. US companies are said to be unprepared for such attacks; industrial control systems have been connected to the internet in recent years, with little thought given to securing them.
With such a backdrop, the growth of the cybersecurity is expected to grow exponentially. Investors can choose to park some money in this increasingly important trend by buying into the Cybersecurity US portfolio on iAdvisor, which has returned 8.1% year-on-year as of Friday.