Thank You, America

Source : TODAY, Monday, October 8, 2007

Strong US job data should help to stop recession in Asia

UNITED States jobs data showing that the country’s economy is likely to skirt an outright recession should help set the tone for Asian markets, including Singapore’s, this week.

In addition, Singapore’s third-quarter economic report, due to be issued early on Wednesday at the same time as the Monetary Authority of Singapore’s (MAS) semi-annual policy statement, is widely expected to show continued strong broad-based expansion.

Economists told TODAY they expect third-quarter gross domestic product to have expanded 9 to 9.6 per cent from a year earlier, faster than the second quarter’s 8.6 per cent.

Meanwhile, ING’s economists, in a weekly report, said uncertainty surrounds MAS’policy, which has held a tightening bias since April 2004.

“Irrespective of whether it does (tighten further), we expect the trend of confidence-sensitive capital inflows appreciating (the Singapore dollar) and pushing short-term rates lower will persist,” the report said.

Last week, the Straits Times Index (STI) rose 3.14 per cent to 3,822.62.

Average daily volume totalled 4 billion shares valued at $3.44 billion, compared with 2.58 billion shares worth $2.75 billion the week before.

On Friday, the US Labor Department said employers outside the farm sector added 110,000 jobs in September, more than economists had predicted.

The report also significantly revised the same figure for previous months: In August, the economy gained 89,000 jobs, compared with the previouslyreported loss of 4,000 jobs for the month.

Morgan Stanley chief US economist Richard Berner said the change to the August jobs figure exceeded almost all expectations. “We’re not talking about an economic boom. We still have a slowing job picture. But it’s one that’s far less dire than the one that was portrayed by the data” when it was released a month ago, he said.

The good news on job creation drowned fresh warnings on housing-related losses. Washington Mutual and Merrill Lynch said their third-quarter profits would be hit by turmoil in the mortgage and credit markets.

Merrill projected it would lose as much as US$0.50 a share in the quarter because of writedowns of US$5 billion ($7.4 billion) on sub-prime mortgages and other investments.

Still, investors, as they did all of last week, ignored the bad news from companies hit by subprime losses. Merrill’s shares ended the day up 2.53 per cent and Washington Mutual was up 2.24 per cent.

“It’s all good, that’s the motto right now,” said Mr Russ Koesterich, head of investment strategy at Barclays Global Investors. — AGENCIES