Singapore Markets Morning Briefing - what you need to know for Thurs April 19, 2012

After breaking through the 3000 level, the STI is set for some downside following retreat on Wall Street and Nikkei’s poor start.

OCBC Investment Research said:

The retreat on Wall Street overnight and the poor Nikkei start (-0.8% now) are likely to weigh on local sentiments this morning.

The STI had initiated a technical rebound yesterday after taking cue from the improving US market the prior night; after opening nearly 0.6% higher, the index held on to most of its earlier gains to close around 0.5% in the black.

But with today's tone likely to turn more downside biased, we could see the index drifting lower this morning while being capped by the 3005 (recent minor peak) immediate resistance.

Beyond that, the subsequent resistance still lies at the 3030 (key peaks) vital obstacle. On the downside, 2945 (recent minor trough) is still the immediate support, followed by the subsequent key base at the 2900 vital resistance-turned-support.

IG Markets Singapore meanwhile noted:

While the STI broke through the 3000 level last night it faces a tough challenge to stay in this zone today after a choppy night on Wall Street and Europe.

An unwelcome combination of sliding US tech stocks and Spanish debt jitters stopped further rallying on Wall Street and European markets.

Among the major averages, the Dow Jones Industrial Average was down 0.6% at 13033. The S&P was 0.4% lower at 1385, while the NASDAQ shed 0.4% to finish at 3031.

But the sell-off may have been sparked by profit-takers in IBM and Intel positions causing to a short-term blip. However, it doesn’t bode well for Asian tech stocks today which rallied yesterday and helped regional bourses put on strong gains.

Global markets also weren’t done any favours from Spain whose debt problems resurfaced following a spike in bad loans, as non-performing loans as a proportion of total lending jumped.

This could lead to some nail-biting moments ahead of today’s 10-year bond auction, which is a litmus test for investor confidence towards Spain’s ability to service its debts.

There are fears the eurozone could become the new Japan, suffering decades of virtually no growth and tumbling asset prices, if it survives the current crisis.

Last night the FTSE 100 was down 0.4% while the DAX dropped 1%. The EUR has held steady against the USD sitting at $1.312. Almost two-thirds of IG Markets’ clients have taken short positions in the currency pair, as eurozone sentiment faces some tough days ahead.

On the commodity markets, WTI crude slipped 1.5% to $102.67 as US stockpiles rose by more than double forecasts. Brent crude is little changed at $117.84.

Global equities are in a holding pattern waiting for a new catalyst to spark a Q2 rally. With no clear signs of further central bank liquidity and unconvincing global economic data it’s hard to know where this spark will come from.

This has led some large institutional investors to take money out of the markets and increase their cash holding, which is being mirrored by many local traders.

However, traders may take heart from news that the STI has outperformed private property since the Global Financial Crisis (GFC) according to figures from SGX. Its research shows the STI has gained 77% since the first quarter of 2009 compared with 47% for private property (based on URA’s Property Price Index).