STI drops over 1% after US markets tumble on rate, inflation uncertainties

[SINGAPORE] The Straits Times Index (STI) declined by over 1 per cent on Thursday morning amid declining investor sentiment, as US markets wobble due to inflation fears and a hawkish Federal Reserve chair.

The benchmark index fell to an intra-day low of 5,638.94 before rebounding to 5,669.6 as at 9.37 am, down 43.59 points or 0.8 per cent.

Across the broader market, losers outweighed gainers 193 to 171, after 190.8 million securities worth S$402.6 million were transacted.

Local banks were a sea of red in the morning. DBS ticked down 0.8 per cent to S$74.42, while UOB was 0.8 per cent lower at S$43.52. OCBC fell 2.1 per cent to S$29.15.

Keppel was down by over 5 per cent as at 11.27 am, hitting an intraday low of S$11.35 in the afternoon, after it reported that its H1 net profit fell 59 per cent.

AEM Holdings and UMS dropped significantly in early trade, down 6.4 per cent and 3.2 per cent, respectively.

Meanwhile energy plays had a mixed showing, with Oiltek down 0.7 per cent but RH PetroGas rising 3.1 per cent as at 10.22 am.

The Dow Jones Industrial Average closed over 1,000 points lower on Wednesday, cementing its most significant decline since April last year, while the S&P 500 logged its lowest level this month.

Key Asia markets were mixed, on the other hand, with South Korea’s Kopsi up 4 per cent on Thursday morning, while the Nikkei 225 also rose about 2 per cent. The FTSE Bursa KLCI ticked down 0.2 per cent.

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This came as US Fed chair Kevin Warsh kept rates unchanged in the 3.5 to 3.75 per cent range, which markets interpreted as a renewed emphasis on price stability, but rejection of any implicit inflation target above 2 per cent as a more hawkish signal.

James Ooi, market strategist at Tiger Brokers, said the retreat from providing forward guidance gives the Fed greater policy flexibility.

However, it also leaves investors with less clarity on the policy path ahead.

“That uncertainty could translate into higher market volatility, and expectations of a September rate hike implied by futures markets should be viewed more as a reflection of investor sentiment rather than a definitive forecast of how FOMC (Federal Open Market Committee) members will ultimately vote,” he said in a Tuesday note.