Banks, US rally help STI rise 1.3% this week

A FIRM week for the Straits Times Index (STI) ended on Friday with a mixed session that saw the index lose 2.73 points, a loss that limited the gain over the five days to 37 points or 1.3 per cent at 2,956.13, and the broad market record 203 rises versus 203 falls.

Banks have been the main driving force based on the thinking that higher interest rates mean wider margins. Also playing a part has been the government's declaration that it will provide financial support for the battered oil and gas (O&G) sector to which banks are heavily exposed.

Providing the backdrop was Wall Street, where the reflationary, Trump-driven rally continued despite no clear indications of what the new administration intends to do and despite the futures market pricing in a 100 per cent chance of a rate hike at next week's Fed meeting. Also influencing trading were the Italian referendum on constitutional reform last weekend and the European Central Bank (ECB) meeting on Thursday where it was announced that bond purchases were to continue until December 2017 but the pace will slow next April onwards from 80 billion euros (S$120 billion) per month to 60 billion euros.