Singapore Markets Morning Briefing - what you need to know for Mon April 2, 2012

The strong Nikkei start and the improvement in US index futures set the tone for today’s trading.

OCBC Investment Research said:

Despite the generally muted reactions on Wall Street last Friday night, the improving US index futures (+0.4% now) and the strong Nikkei start (+0.7% now) is likely to boost local sentiments this morning.

As a recap, the STI turned in another muted session last Friday; after 0.5% higher opening, the index drifted horizontally for almost the entire day before closing 0.6% in the black.

But with today's tone likely to show some significant improvements, we could see the index inching higher towards the 3030 vital resistance again for another test, with the subsequent obstacle pegged at the 3075 support-turned-resistance.

On the downside, we still see the immediate base at 2975 (recent trough), followed by the next support the 2900 key resistance-turned-support.

IG Markets Singapore meanwhile noted:

Quarter 2 of 2012 started in buoyant mood with better-than-expected Chinese manufacturing data. With US non-farms payroll data due out along with a handful of key PMI numbers the week ahead could set the path for what to expect this quarter.

Q1 saw a vast improvement in sentiment towards risk assets with global equities experiencing some big gains. The STI ended the quarter up 14%. But as we headed into the home straight of Q1 a few doubts crept back into trader’s minds about the sustainability of this year’s rally. Was the push coming from central bank largesse, a quick fix for Europe, the bulls’ overly-optimistic take on the US economy or a genuine economic recovery in the making?

Q2 could help answer this question with plenty of key data to digest this month alone with US employment and manufacturing data along with corporate earnings, which will reveal how well companies have dealt with the downturn and if they are seeing a pick-up in activity.

Wall Street finished the quarter with a bang which augers well for Asia today. The Dow Jones Industrial Average was up 0.5% at 13212. The S&P was 0.4% higher at 1408, while the NASDAQ shed 0.1% to finish at 3092.

Sentiment on Friday was also lifted by the eurozone finance ministers’ decision to raise their firewall to €700 billion.

However, most of Friday’s events have been pushed aside by yesterday’s China PMI release, which smashed expectations. The sense of relief was magnified because many investors had been mentally prepared for a soft official print after the weak private sector flash PMI released over a week ago.

While the official figures are at odds with the unofficial HSBC PMI they are likely to temporarily ease China growth concerns.

Singapore traders can take heart from these upbeat figures from Asia’s most important economy, especially after the one-way traffic of bad news being driven out of China last month. However, this optimism may be cancelled out by a possible pullback after Friday’s bulk-buying by fund managers window-dressing their portfolios.