EON, Germany&rsquo s largest utility, climbed 4.7 percent, while steelmaker Salzgitter AG rose 1.9 percent. Gagfah SA added 1.6 percent after the third-biggest German property company raised its 2014 earnings forecast for a second time. Swiss Life Holding AG (SLHN) increased 4.3 percent after posting first-half profit that exceeded estimates and saying it will buy real estate asset manager Corpus Sireo.

The Stoxx Europe 600 Index rose 0.4 percent to 330.07 at 8:56 a.m. in London. The benchmark has still fallen 5.6 percent from a six-year high on June 10 as U.S. President Barack Obama authorized air strikes against militants in Iraq and concern grew over fighting in Ukraine and Israel. Germany&rsquo s DAX dropped 10 percent from its record through the end of last week, entering a correction.

Standard & Poor' s 500 Index futures gained 0.4 percent today, while the MSCI Asia Pacific Index climbed 0.3 percent.

" This could be the trough of European corporate earnings that we&rsquo ve all been waiting for," Dirk Thiels, head of investment management at KBC Asset Management NV, said by phone from Brussels. " Since fundamentals have not changed and the global economy is still headed in the right direction, I see the recent correction as a buying opportunity."

 

International Enterprise Singapore (IE Singapore) announced yesterday that it had trimmed its full-year NODX growth forecast from 1-3 per cent to between -2 and -one per cent.

NODX fell 2.3 per cent year on year in the first half of this year.

The trade promotion agency also narrowed the forecast for total trade growth from 1-3 per cent to 1.5-2.5 per cent. Total trade rose 5 per cent in the first half of the year.

NODX and total trade slipped 6 per cent and 0.5 per cent respectively last year.

Yesterday' s revisions in the trade numbers came on the heels of the Ministry of Trade and Industry' s adjusting its full-year economic growth forecast from 2-4 per cent to 2.5-3.5 per cent.

Looking ahead, IE Singapore said it expected the NODX to see a " modest improvement" in tandem with a gradual pick-up in the global economy, though its one per cent decline in the first quarter was extended to a bigger 3.4 per cent fall in the second.

Total trade growth, at 7.2 per cent in the first three months, moderated to 2.9 per cent in the following three months.

Growth in non-oil re-exports (NORX) also slowed from 14.3 per cent to 2.9 per cent over the same period. Still, the NORX put in a respectable 8.1 per cent gain in the first half and is tipped to remain " resilient" .

Quarter-on-quarter, the NODX dipped by a seasonally adjusted 0.1 per cent in Q2, after a 0.8 per cent drop in Q1.

The electronic NODX fell 1.2 per cent in Q2, against a 5.4 per cent decline in Q1.

Quarter-on-quarter, the non-electronics NODX rose a seasonally adjusted 0.4 per cent in Q2 and 1.2 per cent in Q1, but not enough to offset the fall in the electronics NODX.

Compared to a year ago, the electronics NODX tumbled 13.8 per cent in Q2 and 12.8 per cent in Q1. The non-electronics NODX inched up 1.5 per cent in Q2, following a 4.5 per cent rise in Q1.

NODX shipments to the top 10 markets - except for China, Malaysia, Indonesia and the United States - fell in Q2.

China was Singapore' s biggest market in the first half of this year, with 15.2 per cent of total NODX, which jumped 11.6 per cent in Q2 in the first half, the rise was 16.4 per cent.

Exports to the US rose 0.6 per cent in Q2, and 3.8 per cent in the first half. They increased 11.9 per cent to Malaysia for Q2, and 8.2 per cent in the first half. Q2 exports to Indonesia rose 4.7 per cent and 2.3 per cent in the first half.

Hong Kong, the European Union and Thailand were the biggest contributors to the NODX' s decline in Q2. Shipments to Hong Kong plunged 25.4 per cent (-22.6 per cent in the first half) to the EU, exports were down 13.1 per cent (-10.5 per cent in the first half) and to Thailand, they slipped 11.5 per cent (-6.4 per cent in the first half).

 

EVEN though the government has reiterated that it is not yet time to lift the property cooling measures, some real estate consultants are calling for a review of the earlier taxes imposed to rein in speculators, which they claim have an inflationary effect.

Consultants felt that with the implementation of total debt servicing ratio (TDSR) to cap total borrowings at 60 per cent of gross monthly income, the additional buyer' s stamp duty (ABSD) and the seller' s stamp duty (SSD) have become less relevant.

Speaking at the National Real Estate Congress yesterday, Colliers International managing director Dennis Yeo advocated that the ABSD be lifted for Singapore citizens and the SSD to be scrapped.

" Nobody would question the reason behind the TDSR. But now with TDSR being in place for slightly over a year now, we then have to look at all the other earlier measures that were put in place to see whether they were conflicting or inflationary," he said. " We do not want prices to go out of control, but transaction costs add on to the price of the property."

 

Turnover remained depressed at 1.6 billion units worth S$802.3 million and excluding warrants, there were 239 rises versus 213 falls.

Brokers reported little change in sentiment, interest and the overall trading pattern from that of the past six months.

Conditions were described as generally soft, albeit prices being supported by a yearning for yield in a market where interest rates have been held low for several years now.

 

While the manufacturing sector was largely to blame for the last quarter' s slowdown, growth in the services and construction sectors also moderated during the quarter.

Still, with the global economy making more sure-footed strides towards a recovery, hopes are high for a better second half in this year - although manpower constraints could weigh some labour-intensive segments down.

Given a surprise turnaround in June' s manufacturing output, economists had widely expected that the Q2 Gross Domestic Product (GDP) growth would overshoot the flash estimate. The 21 private-sector economists polled by Bloomberg ahead of yesterday morning' s release of the growth data by the Ministry of Trade and Industry (MTI) had a median Q2 growth forecast of 2.3 per cent - 0.1 of a percentage point shy of the actual figure.

This had seemed likely, after Prime Minister Lee Hsien Loong announced last Friday that Singapore had grown 3.5 per cent year-on-year for the first half of 2014.

He also narrowed Singapore' s full-year growth forecast to 2.5-3.5 per cent, from an earlier range of 2-4 per cent.

MTI' s economics division director Yong Yik Wei said the tighter forecast implies that the government expects sequential improvements in the second half of the year, on the back of a " modest pick-up" in the global economy.

After seasonal adjustments, the GDP grew an annualised 0.1 per cent quarter-on-quarter in Q2. This beat both the flash estimate - a contraction of 0.8 per cent - as well as the consensus market forecast for a decline of 0.3 per cent.

But this was still a moderation from the 1.8 per cent quarter-on-quarter growth in Q1, which had been revised upwards from 1.6 per cent.

Dragged down by a contraction in electronics output and slower growth in transport engineering production, the manufacturing sector grew 1.5 per cent year on year in Q2. This was a sharp slowdown from the 9.9 per cent expansion in Q1, but higher than the advance estimate of 0.2 per cent.

Growth in the services sector also moderated to 2.6 per cent from 3.9 per cent in Q1, a notch lower than the earlier estimate of 2.8 per cent. The easing was broad-based across the sector, and was led by transportation & storage, wholesale & retail trade, and accommodation & food services.

MTI said that in the next six months, in tandem with improving global economic conditions, externally-oriented sectors such as finance & insurance and wholesale trade are likely to support growth.

The ministry added that domestically-oriented sectors - including business services and information & communications - are expected to " remain resilient" in H2 2014.

" However, growth in some labour-intensive segments such as retail and food services may be weighed down by labour constraints."

While most private-sector economists' 2014 GDP growth projections fall within the government' s new 2.5-3.5 per cent forecast range, that of Mizuho' s Vishnu Varathan, for example, are more sanguine.

" (The narrowed band) implicitly suggests that there will be no acceleration in growth into the second half of the year - a rather conservative view by our reckoning. But perhaps this view prices in unknowns from supply-side constraints amid restructuring, geopolitical risks and some headwinds from expectations of US rate hikes."

His reckoning is that GDP growth will come in at 3.8 per cent in 2014.

Indeed, MTI permanent secretary Ow Foong Pheng said the government' s forecast range " factors in the downside risks of the global economy" , including the chance that tensions in oil-producing regions could escalate and the impact of tighter regulations in China' s shadow banking sector.

Unit labour costs and unit business costs of manufacturing accelerated during the second quarter, and labour productivity returned to contraction mode (-1.3 per cent from Q1' s 0.7 per cent).

Finance & insurance (1.6 per cent) and manufacturing (1.1 per cent) were the only sectors with productivity improvements. The sectors with the sharpest declines in productivity were accommodation & food services (-3.2 per cent), business services (-2.7 per cent) and construction (-2 per cent).

But Mrs Ow cautioned against getting carried away by quarter-to-quarter changes in productivity numbers: " More importantly, we need to look at what' s happening sector by sector. Are companies picking up the (government' s) schemes, are they moving up the value chain? Because quarter-to-quarter, depending on GDP figures, it will fluctuate."

As core inflation looks set to creep higher, economists from Citi, Mizuho, and UOB believe that the central bank will keep to its stance of a " modest and gradual" appreciation of the Singapore dollar Nominal Effective Exchange Rate (S$NEER) come the next monetary policy meeting in October.

 

Traders rushed to sell the stock of handbag and accessory maker and retailer Kate Spade & Co, which plummeted 25.4 per cent to close at US$29.00 in its busiest day of trading ever with 52 million shares changing hands. Kate Spade & Co reported better-than-expected sales, which had helped lift the stock to a seven-year-high at US$42.87 in early trading. The stock reversed course, though, after the company warned that gross margins would be weaker than expected for the year.

The S& P 500 energy sector index ended down 0.7 per cent in sync with the drop in oil prices. Southwestern Energy Co shares fell 2.8 per cent to US$38.21, while Consol Energy Inc shares ended down 2.4 per cent at US$39.49. The two stocks were the biggest losers in the S& P energy index.

Brent crude fell to a 13-month low due to worries about oversupply, even with possible disruptions to Iraq' s production at the forefront. US September crude also settled lower.

 

 

 

At around 1.30pm Singapore time, DBS was up 16 Singapore cents at S$17.97, while UOB had gained 11 Singapore cents and was trading at S$22.80. Meanwhile, OCBC Bank was 11 Singapore cents higher at S$10.21.

During intraday trading, DBS hit a high of S$18.04, while UOB climbed to S$22.88 and OCBC rose to S$10.23.

This comes as ratings agency Moody' s said that the new liquidity coverage ratio (LCR), for which the Monetary Authority of Singapore recently released its consultation paper, is expected to be credit-positive for Singapore' s largest banks. The LCR rules, which will apply to Singapore banks and their foreign branches, will ensure that banks have enough high-quality liquid assets (HQLAs) to withstand a 30-day liquidity stress test.

 

This week, stocks will likely continue the rebound that began on Friday unless another shock comes from Ukraine or eurozone gross domestic product (GDP) data. At 16,555 the Dow Jones Industrial Average is almost flat for 2014, and technical analysts say this week represents an important test of investor confidence.

Stocks plunged in the middle of last week after Polish prime minister Donald Tusk said a troop buildup on the Ukraine border increased the odds of a Russian invasion. Stocks snapped back on Friday after reports that Russia was discontinuing military exercises on the border.

European Central Bank (ECB) president Mario Draghi acknowledged that the Ukrainian conflict would eventually have economic repercussions for the eurozone, but stressed that it was too early to attribute the slowdown seen in Italy and other nations in the second quarter to the fighting on the trading bloc' s eastern frontier.

" Mr Draghi noted the difficulties in assessing the impact of geopolitical risks, indicating such an assessment was at an early stage," said analysts at Nomura Securities, in a research note. " He said that it was difficult to ' precisely define the ECB' s options in the future, especially if the conflict were to escalate' ."

A reading of eurozone economic growth due on Thursday could reveal whether Europe is already feeling the pinch from its Russian estrangement. To a much greater extent than the US, Europe' s economy is intertwined with that of the world' s largest nation. Even before President Vladimir Putin banned sales of European food products last week, Europe' s bankers, carmakers and luxury-goods manufacturers were likely feeling the Russian slowdown.

Although global economic future is uncertain, US consumers appear to be finally shaking off the recession - second-quarter GDP growth of 4 per cent was much higher than forecast.

Excluding Citigroup, which booked litigation charges, the aggregate second-quarter earnings rate for Standard & Poor' s 500 corporations is 10 per cent with 450 of the reports in so far, according to Thomson Reuters.

More importantly, as noted by money manager Alpha Capital Management of Austin, Texas, corporate sales are finally growing.

" For much of the past two years, lacklustre sales forced companies to boost earnings by cutting costs, squeezing suppliers and buying back stock," said Alpha Capital, in a note to clients. " But second-quarter results for companies in the S& P 500 index show signs of a return to basic revenue growth. Overall revenue at the 500 largest US companies by stock-market value is on track to climb about 4.3 per cent from last year' s second quarter," one of the strongest increases in demand reported during the recovery so far.

Some contrarian analysts say the brinksmanship in Russia, Israel and elsewhere has distracted investors from bullish " fundamentals" , namely the improving outlook for US economic and corporate growth.

" As some of this plays itself out from a geopolitical point of view, investors will realise that some of these companies are doing OK, that we had a not-great but OK jobs report, that GDP is pretty good," said Joe Kinahan, chief derivatives strategist at TD Ameritrade.

" You start putting a few (more) things together in a row, and suddenly the market' s in pretty good shape."

From a technical perspective, the behaviour of the S& P500 index last week was promising for the bulls, said Mr Kinahan. The broad index tested a key support level around 1900 and rebounded convincingly to finish at 1930.

Nothing sums up the contrarian nature of stock markets better than the Argentinian situation. Even as it defaulted on its bonds after negotiations with legacy debt holders failed, overseas investors have bought into its promise as a major oil extractor, corn grower and steel maker.

A US exchange-traded fund of Argentinian stocks, the Global X FTSE Argentina, is one of the strongest performers of any stock fund in recent months, up more than 40 per cent from its lows in February.

Investors don' t worry about what' s happening today they worry about what might happen tomorrow.

Even outside war zones, several portents allow for worries about the near future. Statistics from the housing market, for example, suggest that rising prices are putting a dampener on a sector that remains the foundation of the US economy.

This week, economists expect data to show modest gains for retail sales and industrial production in July.

" With . . . consumer confidence at its highest level in nearly seven years, the economy is finally showing some signs of improvement," said Ryan Detrick, a technical analyst.

 

GEOPOLITICAL risk, having not figured for many years, is now suddenly a prominent factor despite encouraging US economic data. Wall Street and markets everywhere have been mainly weak over the past fortnight, ostensibly because conditions are worsening in Ukraine, Iraq and on the Gaza Strip.

This much is now conventional wisdom and certainly sounds plausible. But you' d have to wonder - are sellers really that worried about sanctions against Russia and the conflagrations in Ukraine, Iraq and Gaza to the extent that they can ignore positive US economic data, or are they selling precisely because that positive economic data could lead to higher interest rates sooner rather than later?

Or perhaps it' s a bit of both?

Our guess is that the negative sentiment is due to both - last week' s better-than-expected US jobless claim report on Thursday combined with news of a Russian troop buildup near Ukraine, US airstrikes in Iraq and a premature end to the uneasy Gaza truce between Israel and Hamas to bring the sellers out.