Singapore Markets Morning Briefing - what you need to know for Thurs March 22, 2012

Softer open for the STI is expected following muted reactions on Wall Street and the flat Nikkei start.

IG Markets Singapore said:

It was another sluggish night on Wall Street and across Europe as markets falter after their stellar start to the year and wonder where the next big push will come from.

So far there only seems to be pulls on the horizons. Last night Fed chairman Ben Bernanke warned that higher energy prices will probably slow growth in the short term. This may have spooked traders as no-one has yet got handle on how far oil prices will continue to rise.

Recent efforts to slow their trajectory haven’t lasted for long. After a big retreat from Saudi Arabia offering to increase production, they rebounded after lower-than-expected US crude inventories were revealed yesterday.

They then dipped again after France said industrialized nations are considering the release of strategic crude stockpiles but made little impact on the futures market. WTI crude futures for April delivery still sit at a very toppy $106.89 a barrel while Brent futures are at $124.20.

This volatile path could continue with traders panicking about who will release emergency sources of oil and where new supplies will come from, while world stockpiles continue to be tested.

US markets were mostly weaker, as mixed data saw investors remain cautious. US existing home sales slightly missed consensus, though an upward revision to January offset some of the February disappointment. In Europe there are also renewed fears about Spain with spreads blowing out considerably this month, especially against Italy.

Among the major averages, the Dow Jones Industrial Average was down 0.4% at 13125. The S&P was 0.2% lower at 1403 and the NASDAQ rose a point to finish at 3075.

Close to home another pull factor could be China, which is now targeting its monetary easing at rural areas of the country by cutting the required reserve ratio for branches of the Agricultural Bank of China.
Investors have been putting China under scrutiny over worries about its slowdown but this latest move is a reminder of how it can push the monetary easing button when required.

China will also be in the line of fire today with HSBC’s flash PMI manufacturing numbers out this morning. There is talk of the number coming in above 50 which would signify expansion and keep the hard-landing China bears from the door for a bit longer.

This data is likely to set the tone for the rest of Asia today after no real clues from Wall Street. The STI’s 3,000 level looks likely to be tested again today although traders can take heart that while volumes are still low, the IPO market could be picking up with five potential foreign listings in the pipeline.

But the futures market is pointing at a softer open for the STI this morning.

OCBC Investment Research meanwhile noted:

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

The STI continued to consolidate within a fairly tight range yesterday. Following a flat opening, the index traded in a muted session for the rest of the session before closing just 0.1% higher.

But with today's tone likely to largely remain unchanged, we could see the index hovering around current levels, capped by the 3030 immediate key resistance and the 2960 immediate support (recent minor trough).

Meanwhile, the subsequent obstacle is still marked at 3065 (trough in Jul '11), with the subsequent base pegged at the 2900 key resistance-turned-support.