Singapore Markets Morning Briefing - what you need to know for Thurs Jan 12, 2012

Profit-taking is likely in Singapore as US equities recover from early session losses.

- OCBC Investment Research said mixed US close overnight and softer Nikkei start (down 0.3%) could spark profit-taking in the local bourse today, especially after the STI’s 2.1% rally since Tue.

Daily stochastic indicator also suggests that the market looks slightly overbought; although RSI and MACD indicators remain largely positive.

As such, we could see a minor retracement to 2727 (50-day moving average), but 2700 level is expected to hold.

On the upside, 2800 remains the key hurdle, but the index could run into pretty stiff resistance around 2793 (early Dec 11 high, also 38.2% retracement of fall from 3227-2521).

US equities recovered from early session losses to finish slightly higher as investor sentiment fluctuated between European debt concerns and an improving US economy. Advancers inched ahead of decliners on the NYSE with 759m shares exchanging hands.

The Fed’s Beige Book revealed a more upbeat outlook on the US economy following an improvement in economic activity in the Fed’s 12 districts.

Crude for Feb delivery lost US$1.37, or 1.3%, to close at US$100.87/barrel after an increase in crude inventories.

Gold for Feb delivery gained US$8.10, or 0.5%, to settle at U$1,639.60/ounce on news of record gold imports to China ahead of CNY. Mar silver was up 7.5 cents, or 0.3%, to end at US$29.89/ounce.

- Kathy Lien, Director of Currency research for GFT, noted that with two central bank rate decisions and the U.S. retail sales report scheduled for release on Thursday, investors should brace for a busy trading day.

It has been quiet for most of the week particularly in USD/JPY, but with U.S. consumer spending numbers scheduled for release, a bit more volatility may be unavoidable.

The latest non-farm payrolls report show stronger job growth in the U.S. economy, but that only matters so far as how it can impact consumer spending which is why the retail sales report is so important.

Interestingly enough, despite the improvement in the labor market, consumer spending is expected to rise only 0.3 percent, which is an extremely modest gain especially since the International Council of Shopping Centers reported a 4.5 percent annualized rise in store sales.

The holiday shopping season was a strong one, thanks in large part to heavy discounting and longer hours – according to a spokesman for ICSC, “the last few weeks of December helped to lift full-month performance above our earlier expectation.”

However a similar report on chain store sales from Johnson Redbook showed a 2.1 percent decline in spending in the first five weeks of December from November, which is of course at odds with the rosier results seen in the ICSC report and explains why there is both upside and downside risk to the report.