Singapore Markets Morning Briefing - what you need to know for Thurs May 17, 2012

Soft open is expected for the STI following further losses on Wall Street and the negative Nikkei start.

OCBC Investment Research said:

The further losses on Wall Street overnight and the negative Nikkei start (-0.2% now) could continue to weigh on local sentiments this morning.

As a recap, the STI retreated sharply again yesterday following its failed attempt to retake the 2900 level on Tuesday; after opening some 0.3% lower, the index plunged to a 1.6% loss by the close.

And with today's tone unlikely to see any significant improvements, we could expect the index to inch further south towards the immediate key resistance-turned-support at 2800. Below that, the next base lies at the 2750 minor trough.

On the upside, 2900 is still the immediate key support-turned-resistance, with the subsequent obstacle pegged at the 2950 support-turned-resistance.

IG Markets Singapore meanwhile noted:

Wall Street has turned decidedly bearish on equities as traders decide the eurozone crisis now presents too big a danger.

Fund managers and institutional investors are reducing their exposure to risk assets as the eurozone looks likely it will implode inspired by the Greek political fallout.

All this doesn’t bode well for Asian markets will are already suffering from this sharp turn in risk sentiment. Yesterday regional bourses took another tumble with the STI extending its losses to more than 5% since the first Greek election results.

On Wall Street, the Dow Jones Industrial Average was down 0.3% at 12599. The S&P was 0.4% lower at 1325, while the NASDAQ retreated 0.7% to close at 2874.

US markets had traded in positive territory earlier in the session thanks to some upbeat economic data as housing starts and industrial production beat expectations.

There was even talk of monetary policy easing (QE3) as more members said they would back another round of cheap liquidity if conditions dictated. Even this talk of QE3 did little to lift US stocks highlighting just how concerned investors are right now with the eurozone crisis of confidence.

Things in Europe took a turn for the worst last night over reports that the ECB will freeze lending to some Greek banks. This spooked investors who are seeing a slow and steady trickle of deposits out of Greek banks.

Markets are likely to remain choppy until we get some hard and fast answers on whether Greece will leave the eurozone and who else might follow. With a second election one month away markets will remain choppy with rumour and speculation.

Some traders may be sitting this one out with seasickness while others will be going on fishing trips looking to catch some bargains among oversold stocks.