DBS Investment Insights

Buy the Correction Before It Runs Out of Steam

Dear Customer

• Global equities may recover this week as technicals have improved
• Rise in US Treasury Yields likely to pause
• Patchy US economic data eases fears of an early dilution in the size of quantitative easing
• Euro zone final PMIs confirm a gradual improvement
• China’s May economic data disappointed

Global equities may recover this week, on the back of Friday’s US non-farm payroll report which was not strong enough to argue that the Federal Reserve taper down its USD85 billion monthly asset-purchase programme in the near-term. Technical indicators are signalling the possibility of sustained rebounds in US, Japan and even Singapore equities. There may continue to be volatility in equities and bond markets driven by mercurial policy and interest rate expectations. But we remain confident that the uptrend in global equities remains intact and we should see higher prices over coming months. We reiterate our buy call.

Bond Market Tremors Get Louder

It appears the cracks in the armor of the central bankers created by an over-enthusiastic BoJ's impact on the quadrillion JPY JGB markets are now rippling through the global market place. While every talking head that dares to speak has proclaimed the weakness in bonds as nirvana for equity bulls, it seems they were wrong, very wrong. As bond market tremors ignite everywhere, so equity markets come a little unglued at the prospect that the Fed, ECB, BoJ, and PBOC may not be so omnipotent after all... 

Bond markets...



 

Stock Markets...