Vietnam, Singapore agree to boost ties, cooperation on subsea cables

Economic

Summary:

Singapore and Vietnam on Wednesday have agreed to enhance cooperation in subsea cables, finance, and energy, marking an upgrade in their relations to Vietnam's highest level, during a visit by its Communist Party Chief To Lam to the city-state.

Singapore is the third Southeast Asian nation, after Malaysia and Indonesia, with which Vietnam has established a "comprehensive strategic relationship".

In a joint statement released following the upgrade, Lam and Singapore's Prime Minister Lawrence Wong witnessed the exchange of six agreements and discussed cooperation in undersea cable development, digital connectivity, and cross-border data flows.

Southeast Asian countries, a major junction for cables connecting Asia to Europe, aim to expand their networks to meet the surging demand for AI services and data centres. Vietnam alone plans to launch 10 new submarine cables by 2030.

In December, Reuters reported that Singaporean asset manager Keppel and Vietnamese conglomerate Sovico Group were discussing plans for new undersea fiber-optic cables to boost the region's data centre industry, according to sources familiar with the matter.

In April last year, Vietnam's state-owned telecom company Viettel and Singapore's Singtel announced a preliminary agreement to develop an undersea cable linking Vietnam directly to Singapore, although no construction contract has been announced yet.

The two leaders also discussed green development, industrial parks expansion, and peace and stability in the region. Singapore pledged to support Vietnam in developing international financial centres, the joint statement said.

Singapore ranks among Vietnam's top foreign investors, having invested $10.21 billion last year, which accounted for 27% of Vietnam's total foreign investment, official data showed.

Source:Reuters

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Owen Li

Economic

Levels of open interest in the U.S. Treasuries futures market rarely garner much attention, but this might be one of those occasions, as President agenda threatens to slam the brakes on the U.S. economy, perhaps even putting it into reverse gear.

Commodity Futures Trading Commission figures show that open interest, the broadest measure of investors' exposure to U.S. bond futures, is sliding at a historic pace. In some cases, such as two-year contracts, the fall is the sharpest on record.

In the week through March 4, open interest in two-year futures fell by a record 396,525 contracts, or nearly $80 billion. That's around 10% of investors' total exposure, and it means overall open interest is down 17% from its peak around the U.S. presidential election in November.

Open interest in the 10-year space fell by 503,744 contracts, or $50 billion, the third biggest weekly fall on record and again around 10% of total exposure.

The value of open interest across two-, five- and 10-year contracts fell by $179 billion in the week to $1.858 trillion, the lowest since June last year. More significantly, this marked a notable 9% decline in a single week.

Why does this matter? As a paper by Federal Reserve staffers Andrew Meldrum and Oleg Sokolinskiy found last month, cash market depth "significantly affects liquidity fragility in all maturity sectors" of the Treasury market. In other words, the slump in open interest could mean that one of the world's most important markets has become easier to disrupt.

Exposure to Treasury futures plunges at risky moment: McGeever_1

'POINT OF CONCERN'

Some of this activity is seasonal, as funds are rolling their positions into new benchmark contracts. And some is related to the so-called basis trade, the arbitrage play used by hedge funds to exploit the tiny price difference between cash bonds and futures.

So far, so normal, in which case open interest should pick up again in the coming weeks as investors of all stripes - particularly asset managers on the 'long' side and hedge funds on the 'short' side - rebuild their exposures.

But the sharp moves are coming at a time of heightened volatility and uncertainty across all markets. Wall Street and U.S. Big Tech have borne much of the brunt, with around $5 trillion wiped off the value of U.S. stocks in the last three weeks. But volatility is on the rise everywhere.

Treasury yields have tumbled around 60 basis points in the last month, and implied volatility as measured by the MOVE index this week rose to its highest in four months.

True, there has been no sign of market dysfunction despite the big price moves, but room for complacency is shrinking.

"Uncertainty could keep some investors away," said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities. "If open interest doesn't come back it could be a sign that risk managers are deleveraging. Right now it's something to watch closely rather than a point of concern."

Exposure to Treasury futures plunges at risky moment: McGeever_2

RECORD FALLS

Much of the decline in recent months is down to leveraged funds reducing their 'short' positions more aggressively than asset managers scaling back their corresponding 'long' positions, suggesting speculators are deleveraging.

The value of leveraged funds' aggregate short position across two-, five- and 10-year contracts is now $970 billion. That's down by almost a fifth from the record high of $1.186 trillion in November last year.

This is probably not a bad thing and will likely please regulators who had warned that a disorderly unwind of funds' basis trades could pose major financial stability risks. That hasn't played out.

But further reduced open interest from here at a time of rising volatility might put liquidity, prices and investors' ability to trade under greater strain.

As Meldrum and Sokolinskiy note, "Times of low market depth are associated with an increased probability of low liquidity states in the future."

And at this delicate juncture, anything that impacts liquidity in the world's most important market is certainly worth monitoring.

Exposure to Treasury futures plunges at risky moment: McGeever_3

Source:Reuters

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Cohen

Economic

The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

0701 GMT - Lower-than-expected U.S. CPI data on Wednesday would lead to more yield spread compression between U.S. and German government bonds, say Danske Bank Research's Kristoffer Kjaer Lomholt and Filip Andersson say in a note. The February CPI data is due at 1230 GMT. A Wall Street Journal poll of economists forecasts the headline month-on-month CPI growth at 0.3% from 0.5% previously and they expect the month-on-month core CPI growth to be 0.3% from 0.4% previously. The 10-year U.S. Treasury-German Bund yield spread is 135 basis points, having traded at 221 basis points at the beginning of the year, according to LSEG data.

0700 GMT - South Korea's benchmark Kospi rose 1.5% to close at 2574.82, extending early gains. Steel and chip stocks advanced. Though President Trump's 25% tariffs on all steel and aluminum imports took effect as planned, signs of easing U.S.-Canada trade tensions and a potential cease-fire in Ukraine supported sentiment. Some traders hunted for bargains after recent falls, with foreign and institutional investors being net buyers. Steelmaker Posco Holdings and memory-chip maker SK Hynix both rose 5.9% after two straight sessions of losses. USD/KRW settled 0.5% lower at 1,451.00 in Seoul onshore trading. South Korea's 10-year government bond yield was up 0.6 basis point at 2.766%.

0638 GMT - A rise in German spending will result in higher deficits but it also has the potential to bolster growth in the medium term after years of underinvestment, Nuveen's Laura Cooper says in a note. In the medium-term, a better outlook for Germany will bode well for asset exposure in Europe, the senior macro strategist says. "Importantly, with Germany having greater fiscal capacity to raise its level of debt, the growth impulse more than offsets concerns of fiscal sustainability," she says, Over the medium term, this should contribute to a better structural outlook for Germany, "bolstering the case for European exposures." Germany announced a large-scale long-term spending plan last week.

0635 GMT - The steepening of the German government bond yield curve is likely to extend as the long end bakes in greater issuance, says Nuveen's Laura Cooper in a note. The steepening, where the gap between short- and long-dated bond yields widens, will drive the 10-year Bund yield to 3.1% by year-end, according to Nuveen's forecast. The short end of the German curve remains more vulnerable to the risk of a material escalation on the U.S. tariff front, the senior macro strategist says. This could prompt the European Central Bank to cut interest rates below 2% in this cycle, "keeping the steepener in play," she says. The 10-year Bund yield ended at 2.894 on Tuesday, up 8 basis points, according to Tradeweb.

0628 GMT - China's fiscal plan could offset about 40% increase in U.S. tariffs, ANZ Research senior China strategist Zhaopeng Xing writes in a note. Every 10% U.S. tariff will cost 0.5 percentage points of China GDP over the next four years, the analyst says. The fiscal plan released during the National People's Congress this year was slightly below expectation, he adds. The CNY3.5 trillion actual increment in fiscal deficit is equivalent to about 2.2% of GDP, he says. China's deficit, which is the gap between expenditure and revenue of both general public and government funds budgets, will rise by 2.2 percentage points to 9.9% this year, highest in history, ANZ Research says.

Source：Dow Jones Newswires

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Owen Li

Economic

Beijing has summoned Walmart for reportedly asking Chinese suppliers to swallow the tariff hikes imposed by the Trump administration, marking the latest salvo in the trade spat between the world's two largest economies.

Authorities including China's commerce ministry met with Walmart on Tuesday over what they said was the retail giant's request to get some of its Chinese suppliers to significantly cut prices "in an attempt to shift the burden of U.S. tariffs to Chinese suppliers and consumers," according to a post on Wednesday by a social media account affiliated with China's state broadcaster.

Earlier this month, the White House implemented additional tariffs of 10% on Chinese imports, building on those announced in February. Taken together, the moves raised the average duty rate on Chinese imports to approximately 35% from 14.5%. Beijing retaliated with its own tariffs and slapped trade restrictions on some U.S. companies.

According to the social media account, Walmart reportedly asking Chinese suppliers to lower prices may risk disrupting supply chains and damaging the interests of both American and Chinese companies and consumers. The behavior may also violate commercial contracts and disrupt market order, it added.

"If Walmart insists on doing so, then what awaits Walmart is not just talk," the social media account warned, hinting that the American retail giant might be facing regulatory action.

In a statement Wednesday, the China Chamber Of Commerce for Import and Export of Textiles, a state-backed industry group, said that it had recently received reports from some members saying that large U.S. retailers had asked them to cut prices, pledging to take action to defend Chinese companies' interests.

"The various problems in international trade at present are caused by the unilateral imposition of tariffs by the U.S. government, and both Chinese and American companies are victims," it said.

Wednesday's announcement comes amid expectations that U.S. companies will get caught in the crossfire as U.S.-China trade tensions escalate. Chinese officials are building a list of U.S. technology companies that can be targeted with antitrust investigations and other tools, as Beijing looks to collect as much ammunition as possible for negotiations with the Trump administration, The Wall Street Journal reported in February.

Beijing has already said that it is investigating Nvidia and Google over alleged antitrust issues. It has also banned imports of Illumina's gene sequencers, prompting the San Diego-based company to reduce its forecast for this year's financial performance and cutting $100 million in spending.

Source：Dow Jones Newswires

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Owen Li

Economic

Malaysian palm oil futures opened higher on Wednesday, buoyed by stronger Dalian palm olein and crude oil prices though weaker soyoil prices limited the gains.

The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange gained 9 ringgit, or 0.2%, to 4,497 ringgit ($1,016.04) a metric ton in early trade.

The contract fell 2.96% over the past two sessions.

FUNDAMENTALS

Dalian's most-active soyoil contract (DBYcv1) fell 1.09%, while its palm oil contract gained 0.4%. Soyoil prices on the Chicago Board of Trade were down 0.02%.

Palm oil tracks price movements of rival edible oils, as it competes for a share of the global vegetable oils market.

Oil prices edged up, helped by a weaker dollar, but mounting fears of a U.S. economic slowdown and the impact of tariffs on global economic growth capped gains. O/R

Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.

The ringgit , palm's currency of trade, weakened 0.34% against the dollar, making the commodity cheaper for buyers holding foreign currencies.

India's palm oil imports in February rose 35.7% from January to 373,549 metric tons, the Solvent Extractors' Association of India (SEA) said on Tuesday.

Prices of cooking oil could be buoyed up for years by stagnating production and a biodiesel push in top producer Indonesia that are making traditionally cheap palm oil costlier, eliminating an advantage that also curbed prices of rival oils.

Palm oil still targets 4,360 ringgit per metric ton, as pointed by a rising trendline, Reuters technical analyst Wang Tao said. TECH/C

Palm rises on Dalian palm olein, crude oil prices; weak soyoil limits gains_1

MARKET NEWS

The euro was riding at five-month highs on Wednesday on Ukraine's readiness to accept a month-long ceasefire, while stocks whipsawed on back-and-forth U.S. tariff plans and concern about a U.S. economic slowdown. MKTS/GLOB

DATA/EVENTS

1230 US Core CPI MM, SA, Core CPI YY, NSA Feb

1230 US CPI MM, SA, CPI YY, NSA Feb

1230 US CPI Wage Earner Feb

($1 = 4.4260 ringgit)

Source:Reuters

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Alex

Economic

Chicago soybean futures were largely unchanged on Wednesday, holding near last session's one-week low, with abundant South American supplies and uncertainty over the impact of a trade war on U.S. agricultural sales keeping a lid on the market.

Corn was unmoved, while wheat prices edged higher.

"Soybean supplies are pretty comfortable if you look at Brazilian crop which is entering the market," said one trader in Singapore. "But going forward, the market will take direction from U.S. planting."

The most-active soybean contract on the Chicago Board of Trade (CBOT) ! was flat at $10.11-1/4 a bushel, as of 0312 GMT. Wheat ! added 0.6% to $5.60-1/4 a bushel and corn was unchanged at $4.70-1/4 a bushel.

Soybeans are under pressure from hefty South American supplies hitting the global market.

Brazil's soybean exports are expected to reach 15.45 million metric tons in March, up more than 4% compared with last week's forecast, as the country continues to harvest its massive new crop, according to data from the grain exporters lobby Anec.

Corn prices were weighed down on Tuesday after the U.S. government left domestic corn inventories unchanged in a monthly supply-and-demand report - despite strong export sales and trade tensions with top buyer Mexico.

The U.S. Department of Agriculture pegged 2024-25 U.S. corn stocks at 1.54 billion bushels and exports at 2.45 billion bushels, both unchanged from February. Analysts had expected stocks to decline to 1.516 billion bushels due to robust demand, according to a Reuters poll.

Traders and farmers are keeping a close eye on exports amid U.S. tariff disputes, with major buyers Mexico, Canada and China threatening sales of U.S. agricultural goods.

Commodity funds were net sellers of Chicago Board of Trade corn, soybean, wheat and soymeal futures contracts on Tuesday, and net buyers of soyoil futures, traders said. (COMFUND/CBT)

Source:Reuters

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Warren Takunda

Economic

The risk that the US economy will enter recession this year is rising, according to economists, as Donald Trump’s chaotic approach to tariffs continued to hit markets.

Shares on Wall Street fell sharply on Monday as investors bet the president’s unpredictable tariff trade war and handling of the economy would hit growth, amid a recent plunge in business and consumer confidence.

On another day of selling pressure in global markets, the Dow Jones industrial average was down 1.5%, while the S&P 500 was down 2.4%. Share prices also fell in Europe, as the FTSE 100 tumbled 0.9% in London, Germany’s Dax was down 1.7% and France’s CAC fell 0.9% on Monday.

Economists said the risks of a “Trumpcession” had increased as the president’s brinkmanship and stop-start approach to tariffs rattled global investors, exemplified by last week’s decision to pause US tariffs on goods from Canada and Mexico for the second time in as many months.

Trump declined on Sunday to rule out the possibility that the US economy could tumble into recession this year as he warned businesses and households to brace for a “period of transition” and the potential for higher inflation.

Analysts said the president could have used the interview with Fox News as an opportunity to calm jitters in financial markets but that he instead chose to press on with an increasingly chaotic approach to his second term in office.

Kathleen Brooks of the trading platform XTB said Trump was putting his political goals ahead of the strength of the economy and the stock market. “[His] flip-flopping on tariffs, and his old-fashioned views of America first, is weighing on consumption and knocking confidence.”

Wall Street economists have downgraded their growth forecasts for the US, warning that Trump’s trade wars are proving more damaging for the US economy than first anticipated.

Analysts at Goldman Sachs said on Friday that the chances of a US recession had increased from 15% to 20%, as it revised its forecasts to incorporate higher tariffs and inflation, alongside a hit to gross domestic product and employment.

Morgan Stanley cut its 2025 GDP growth forecast from 1.9% to 1.5%. “While we did expect growth-constraining policies (tariffs and immigration controls) to precede growth-supportive initiatives (tax cuts and deregulation), their severity has been greater than we anticipated. This is especially the case with tariffs, which have come in faster and broader than we had pencilled in,” it said.

Many economists still reckon the US will avoid the widely accepted definition of a recession – two consecutive quarters of shrinking output – but warn that the latest figures show the risks are mounting.

Data from the US economy in recent weeks showed an unexpected fall in consumer spending in January, a widening of the US trade deficit to a record $131bn (£101bn) in the same month, as firms rushed to move goods before the introduction of tariffs, and the biggest fall in consumer confidence in four years in February.

The Atlanta Federal Reserve’s GDPNow model, which predicts growth based on available economic data, suggests the US economy could contract by 2.4% in the first quarter (annualised). The reading can be volatile and is influenced heavily by the ballooning US trade deficit, which is likely to be unwound in future months.

“Markets are now starting to get concerned about the prospects for growth in 2025,” said Paul Donovan, the chief economist at UBS global wealth management. “Trump’s tariff policy has been unpredictable, with a series of retreats so rapid they almost collide with the next tax hike announcement.

“The rather chaotic US tariff policy still allows companies to sell a story to their customers to cover for price increases, and some may also try to raise prices in anticipation of tariffs that actually end up being retreated from.”