Yields on 10-year US treasuries continued to rise during the week of Aug 29- Sept 2, closing above 3.2% on Sept 1. As a reference, the yield was as high as 3.48% in mid-June. The US markets reacted negatively, causing a ripple of selling in global markets in the week of Aug 29 – Sept 2. Year-to-date the S&P500 is down 17%. However, it could be showing signs of a temporary rebound off a one-month low.
Our own risk-free rate, the yield on the 10-year Singapore Government Securities stands at 3.07% as at Sept 2, the highest level since late-June.
No surprise then, that week-on-week, the Straits Times Index declined, falling 44 points to end at 3,205 on Sept 2. The decline takes the STI below the confluence of the 100- and 200-day moving averages at 3,218 and 3,237 respectively. This caused quarterly momentum to fall back to its equilibrium line, and there is a danger that this indicator breaks below equilibrium. If so, the STI may stay weak. Immediate support is at 3,180. A break below this level may indicate the next downside objective.
Although global equity markets may remain under pressure against a background of rising risk-free rates, rising interest rates and quantitative tightening, the Hang Seng Index could be moving in a counter-cyclical direction versus global markets. It remains above its twice tested support at 19,268. Resistance is scaled down to 20,170, the high reached on Aug 29. A breakout above this level would cause an interesting development on the charts.
