Singapore Markets Morning Briefing - what you need to know for Fri Jan 20, 2012

What was described as a stellar start for the Nikkei Index and the continued Wall Street recovery mean good news for Singapore.

OCBC Investment Research said:

With Wall Street continuing its recovery overnight and the Nikkei Index having a stellar start (+1.5% at the moment), we could see the local bourse opening significantly higher this morning as well.

As a recap, the STI rebounded from its 0.7% correction on Wednesday to end almost 0.6% higher yesterday; this suggesting that the investors are already feeling more optimistic about the market outlook.

And with today's tone likely to remain upside biased, the index could climb further in the direction of the next key support-turned-resistance at 2910.

Above 2910, we still see the subsequent obstacle at the 3000 key psychological level. On the downside, 2793 is still the immediate support, with the subsequent base pegged at 2735 (minor resistance-turned-support and 100-DMA).

Meanwhile GFT noted:

Risk appetite continues to improve with the Dow Jones Industrial Average rising to its highest level in 5 months. The U.S. dollar lost value against the European currencies but gained strength against the Japanese Yen and the comm. dollars.

According to this morning's U.S. economic reports, conditions in the labor market continue to improve. Weekly jobless claims fell to its lowest levels since April 2008 and as a survey period for the January non-farm payrolls report, it reflects a healthy improvement in the labor market.

Weekly claims dropped to 352k from 402k while continuing claims fell to 3.432 million from 3.647 million. Federal Reserve officials will be relieved to see claims back off from the 400k mark and at bare minimum, we believe this week's jobless claims report points to payroll growth in excess of 150k.

Although housing starts and building permits declined in December, the U.S. economy is moving in the right direction because the labor market needs to stabilize before housing can follow. Housing starts dropped 4.1 percent last month while building permits declined 0.1 percent. November was also a very strong month for both reports, so the latest decline could represent some payback.

Inflation on the other hand is muted with consumer prices holding steady in December. Much of the decline had to do with lower gas prices because core CPI grew 0.1 percent. Manufacturing activity in the Philadelphia region grew at a faster pace in January but the reading was lower than expected while the December number was revised downwards.

The latest economic reports may not contain enough changes to affect Fed policy, but there is enough to make them feel less concerned about the labor market and more confident in their current monetary policy stance.