Singapore Markets Morning Briefing - what you need to know for Mon April 16, 2012

Traders in Singapore are looking at global markets following the retreat on Wall Street and with China’s GDP growth lower than analysts’ expectations.

OCBC Investment Research said:

The retreat on Wall Street last Friday night and the negative Nikkei start (-1.2% now) are likely to dent local sentiments this morning.

Despite a relatively strong rebound with a 0.7% higher opening in the previous session, The STI gave up most of its earlier gains to end just 0.3% in the black on Friday.

And with today's tone likely to turn more downside biased, we could see the index slipping further south in the direction of the 2945 (recent minor trough) immediate support.

Below that, the key base still lies at the 2900 vital resistance-turned-support. On the upside, 3005 (Friday's intraday high) is now the immediate obstacle to overcome, followed by the subsequent key resistance at 3030 (key peaks).

IG Markets Singapore meanwhile noted:

Last week was one of the most volatile for global markets as they dipped from US employment figures, rose again with hopes of Fed intervention and then fell on Friday with China’s lower-than-expected GDP numbers.

The STI also dipped in and out of the red last week but finished higher on Friday after Singaporean GDP figures came in stronger-than-expected. But local traders will look to global markets this morning and see how early-year optimism has started to fade.

All eyes had been on the US and an economy creating jobs and lifting market sentiment. This played its part in the rally equities enjoyed in Q1. But betting all your chips on the US economy steadily and consistently recovering is looking an increasingly risky bet.

The one bright spark has been US corporate earnings which are looking firmer. Google and now JPMorgan have already pleased shareholders but this wasn’t enough to overshadow the downbeat macro-economic data.

Traders are now shifting their attention east to China, swiftly bypassing Europe, as the possible next catalyst to drive markets higher. While China’s GDP growth at 8.1% was slightly lower than analysts’ expectations of 8.4% it wasn’t all bad news.

Retail sales, industrial production and car sales have all picked up while bank lending surged last month. There is a strong argument for China’s GDP growth to have now bottomed out.

But for the here-and-now the focus is on the lowest economic growth for three years and the markets are far from delighted. But traders may be forgetting the fact that the Chinese government isn’t just watching as a powerless spectator. It will act if and when it feels the time is right in a number of ways, the most obvious being monetary easing.

On Friday, the Dow Jones Industrial Average was down 1.1% at 12850. The S&P was 1.3% lower at 1370, while the NASDAQ shed 1.5% to finish at 3011.

Spain also joins China as economies that are a permanent fixture on traders’ radar screens. Yields on Spanish government debt have breached 6% and are spooking markets a little too soon after the Greek debt crisis was temporarily averted.

The eurozone still needs time to combine its financial stability packages and restore a little investor confidence before it can better handle the next crisis.

At the start of a new week, local traders may still be sitting on the side lines with volumes historically low, but the fundamentals are looking good for the Singapore economy with resilient growth, strong multi-sector performance and a bouyant dollar.