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Energy stocks rise cheerfully as crude oil returns to $50

By Margaret Yang, CMC Markets

Equities – Singapore shares rallied on Tuesday, as strong crude oil prices sent stocks higher. The Straits Times Index rose 0.6%, lifted by three local banks and O&G names such as Sembcorp Marine (+6.6%), Sembcorp Industry (3.2%) and Keppel Corp (+1.5%).

OCBC bank gained 0.7% after it announced the sell-off of its life insurance business in Vietnam for S$48.2 million. Noble Group’s share price recovered 6.4% after two days of heavy selling.

The Hang Seng Index soared 1.4%, mainly lifted by the telecom (+3.3%) and energy (+2.1%) sectors. It has rebounded almost 10% since its lowest level in May. With its momentum remaining strong, its immediate resistance levels can be found near 21,700 and 22,300.

The S&P 500 advanced only 0.1% as the rally in energy (+2.14%) and telecom (+1.49%) sectors was offset by lower financial (-0.29%) and healthcare (-0.67%) sectors.

FX – According to the latest data, China’s foreign reserves dropped by US$28 billion month on month to US$3.19 trillion, marking its lowest level since 2011. This signals that the capital outflow may have accelerated after a two-month break, and may trigger another round of concerns on a weakening yuan. The offshore renminbi CNH depreciated 1.6% in the month of May.

The Dollar Index slides further to the 93.74 area, as the market is now expecting a slower pace as regards rate hikes. USD/JPY is little moved at the 106.90 area this morning, with the immediate support and resistance levels at 105.60 and 108.00 respectively.

EUR/USD was little changed in the 1.1366 area after a 200-pip rally last Friday. USD/SGD softened further to 1.3520 this morning. In the short term, a strong support level could be found around the 1.3400 area and the resistance level at 1.3800 area.

Commodities – The WTI crude oil price closed above the $50 mark for the first time in eight months, resulting in a cheerful rally in energy stocks. The market is expecting the DoE weekly crude oil inventory to drop further, with the number forecast to be -3.25 million barrels.

Gold prices stayed near to $1,246, with the immediate support and resistance levels at $1,240 and $1,286 respectively.

Crude Oil West Texas July 2016

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Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.