STI drops 1.4 % amid calls for Fed rate cuts
Cutting policy rates bodes well for the equity market but squeezes interest margin for banks. The index, being heavy with banking counters, is dragged down as a result
SINGAPORE was left out from the rebound played out elsewhere in Asia-Pacific markets on Tuesday (Aug 6), a day after the global meltdown that saw Tokyo’s Nikkei 225 diving 12.4 per cent.
The Straits Times Index (STI) was down a further 1.4 per cent or 45.23 points to close at 3,198.44 points, after plunging 4.1 per cent a day ago.
Job numbers that caused the markets to worry about impending recession in the United States have given rise to calls for the Federal Reserve to cut rates now to support the world’s largest economy.
Nobel prize-winning US economist Paul Krugman was one of them, writing on social media X: “I wasn’t calling for an inter-meeting cut, because that might signal panic. But since we may be seeing a panic anyway, that argument loses its force. Real case for an emergency cut soon.”
Cutting policy rates bodes well for the equity market but squeezes interest margin for banks. The STI, being heavy with banking counters, was dragged down as a result.
Closing 1.7 per cent or S$0.50 lower at S$29.58 made UOB the worst performing banking counter among the trio on the benchmark, although its peers DBS and OCBC were not far behind. DBS closed S$0.52 or 1.6 per cent down at S$32.75, while OCBC fell S$0.18 or 1.3 per cent to S$13.84.
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CapitaLand Ascott Trust closed 1.1 per cent or S$0.01 lower at S$0.86, after the stapled group’s announcement of a S$165 million sustainability-linked multi-currency revolving credit facility for general corporate purposes.
Gainers beat decliners 298 to 289 across the broader market, as about 1.4 billion securities transacted at nearly S$2 billion in total value.
Bourses elsewhere took comfort from the higher-than-expected US services purchasing managers’ index released overnight as the data indicated lower increase in economic activity than a recession.
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The CBOE Volatility Index, or the VIX – commonly regarded as the market’s “fear index” – dipped 11.2 per cent over Asian trading hours, after rocketing 100 per cent on Monday.
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