Singapore Markets Morning Briefing - what you need to know for Fri March 30, 2012

Nikkei started poor and overnight there were mixed reactions on Wall Street.

OCBC Investment Research said:

The mixed reactions on Wall Street overnight and the poor Nikkei start are unlikely to provide any positive cues to the local bourse this morning.

After opening 0.5% lower and slipping further to a 0.7% loss by the close yesterday, the STI is now hovering just above its 3-month uptrend support line at the moment.

It will not be surprising to see the STI initiating a technical rebound at this point. But should this rebound proved unsustainable in the days ahead, we could see the index heading further south towards the 2975 support (recent trough) for a test.

Beyond that, the subsequent base lies at the 2900 key resistance-turned-support. On the upside, we still see 3030 as the vital obstacle to overcome, with the next resistance marked at the 3075 support-turned-resistance.

IG Markets Singapore meanwhile noted:

Despite risk aversion coming back into the market lately this quarter has been one of the strongest for many years.

The three catalysts for this year’s rally have been central banks’ largesse, an improving US economy and the easing of tensions in the Eurozone, specifically Greece.

While more central bank liquidity is still a possibility, any future quantitative easing is less likely to have the same impact second or third time around. The US economy is still on the mend but has been faltering of late.

In Europe, while a Greek tragedy was avoided there are still worries over the region’s other weak economies including Spain, Italy and Portugal. Plans are being drawn up to build a firewall to protect for such an eventuality but there’s still the big question of how this is going to be funded.

So as we head into the second quarter it’s hard to know whether any of these three drivers can keep on pushing markets higher. At these current levels, equities are starting to look a little tired.

The STI is definitely in need of a catalyst after two days of retreat. Although looking at the bigger picture, it is up more than 13% this quarter and investor confidence is in much better shape than the end of the previous quarter.

On Wall Street last night the S&P 500 slipped 0.2% although the selloff could have been greater. Unemployment claims fell to a four-year low although the numbers were broadly in line with expectations.

US revised GDP and consumer confidence levels also came in as expected which failed to excite the markets. This lack of a spark is likely to set the tone for today’s trading in Asia.