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The SET pulled back another 0.55% for the week, closing at 1,421.32 on Friday, after the U.S. Federal Reserve kept the interest rate unchanged following its two-day FOMC meeting, but Fed Chair Janet Yellen insisted during the press conference after the meeting that a rate hike is coming in July. Steve
Grasso, Director of Institutional Sales at Stuart Frankel & Co., told CNBC that Yellen was just blah-blah talking. Wall Street thinks that the Fed funds rate could eventually go negative if the U.S. economy continues to head south.
Here was Yellen’s take on negative rates after the FOMC meeting in September 2015, "We found ourselves with a weak economy that needed additional stimulus, we would look at all of our available tools, and (a negative rate) would be something that we would evaluate in that kind of context."
The USD/THB exchange rate was quoted at 35.233 baht per dollar on Friday, down another 0.10% for the week, while the
THB/JPY printed at 2.9554 yen per baht, down 2.54% for the week. The BOJ decided to refrain from expanding monetary stimulus, sending the yen skyrocketing over 1.86% against the baht on Thursday. The
USD/THB technical support is at 35.20 baht per dollar, while the
THB/JPY broke below the 3.07 yen per baht support level.
The Thailand 10-year bond yield inched up 0.96% for the week, at 2.1% on Friday, down 16.67% year-to-date. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 1.611% on Friday, widened to 0.489 percentage points. The global financial markets are getting nervous about the Brexit vote next week, as the 10-year Japanese government bond
(JGB) yield dropped to negative 0.202% at the low on Thursday, while the 10-year German bund yield printed at negative 0.038%, both record lows.
Since May 2015, the Thailand SET has been positively correlated with the Brent crude oil price, the global benchmark, where the correlation coefficient between both of them is +0.9, over the 100-day period. Traders, including algorithmic and high-frequency traders (HFT), may be creating greater profit opportunities by coupling the volatility and price swings in the crude oil futures market with the SET index.
The WTI crude oil spot price was unchanged for the week, closing at $48.86 per barrel on Friday, while the Brent crude price was down 2.04% for the week to close at $49.36 per barrel, after mixed weekly crude oil inventory reports.
The Energy Information Administration (EIA) weekly U.S. oil inventory report on Wednesday showed a decline of 900,000 barrels to 531.5 million barrels in the week ending June 10, compared to analysts’ expectations for a drawdown of 2.26 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed U.S. crude inventories surprising increased by 1.52 million barrels.
The EIA said the weekly U.S. crude oil production decreased by 29,000 barrels per day (bpd) for the week ending June 10, 2016, to 8.716 million bpd. Weekly U.S. crude oil output has fallen about 9.3% from the peak level of 9.61 million bpd during the week ending June 6, 2015. Separately, the EIA said on Monday that oil output in the biggest producing shale areas in the U.S. is forecasted to decrease 118,000 bpd in July from June, to 4.723 million bpd, in line with the precipitous fall in oils rigs operating in U.S. shale.
Houston-based oilfield services company Baker Hughes Inc. said on Friday that the U.S. oil rig count was up another 9 from the previous week, for the third straight week, at 337, but still down 79% from the peak number of 1,609 in October 2014. No one knows how many additional bpd will be produced, as there is no direct correlation between crude oil production and the number of rigs. One can imagine that the most productive ones would be brought back into operation first.
From our long-term technical viewpoint, the SET needs to break out the bearish descending triangle, as well as the 1,480 level, or else the index could pull back to retest the 1,200 level. Statistically, it should be an up-year for the SET, but there is no guarantee. Just a reminder, however, the SET is strongly correlated to the Brent crude price. Thus, as the energy complex goes, so goes the SET. |
