Singapore Markets Morning Briefing - what you need to know for Tues April 24, 2012

Bad economic news from Europe and disappointing company earnings reports from the US are not likely to provide inspiration in local trading.

OCBC Investment Research said:

The 1% correction on Wall Street close overnight and the poor Nikkei start (-0.8% now) are likely to dent local sentiments further this morning.

As a recap, the STI initiated a fairly sharp bearish reversal yesterday; following a 0.1% lower opening, the index slipped persistently for the rest of the day to close nearly 1.1% in the red.

And with today's tone likely to remain downside biased, the index could see further selling pressure towards the immediate support at 2946 (recent trough).

Beyond that, the subsequent vital base is still pegged at the 2900 key resistance-turned-support. On the upside, 3010 (recent peak) is now the immediate obstacle to overcome, with the next key resistance pegged at the 3030 level (various key peaks).

IG Markets Singapore meanwhile noted:

Some very bearish winds of global economic turmoil are expected to blow across Asia today after European manufacturing data and political unrest spooked traders.

Manufacturing activity fell to a five-month low in the eurozone which came just hours after Chinese factory output showed further contraction, seriously derailing hopes of a concerted economic recovery.

On European bourses, the DAX slumped 3.4%, the CAC lost 2.8% while the FTSE 100 fell 1.9%. These big falls came about not just because of the weak economic data but the fact that the messy world of politics is now complicating any eurozone recovery.

With French elections and a Dutch government walkout, cracks are starting to appear in the political system as resistance grows to much-needed austerity measures.

The markets also didn’t like the fact that the eurozone’s two biggest economies – France and Germany – are also struggling and won’t be dragging the rest of the community out of recession anytime soon.

Those optimists who thought the eurozone would bounce back quickly from such a severe crisis which has brought with it deep budget cuts, mass unemployment and civil unrest are experiencing a major reality check. Not surprisingly the single currency slid yesterday and is down to $1.314 against the dollar.

While Europe flounders, the US is not providing much support to global growth either. The US corporate earnings season is starting to lose its shine after last week’s promising start. ConocoPhillips was the latest to disappoint as earnings dropped 3% in Q1 for America’s third largest oil company.

Apple’s results will be keenly watched tomorrow but already the stock is no longer defying gravity as it slipped to $571.70 a share.

On Wall Street, the Dow Jones Industrial Average and the S&P 500 were both down 0.8% while the NASDAQ shed 1%.

So once again the buck stops with China, once the world’s growth engine, as a source of hope for a global recovery. Yesterday’s flash manufacturing figures disappointed traders in Asia, even though they showed a slight improvement and pointed to China factory activity bottoming out.

But this wasn’t enough to convince traders in Asia, as the STI slid more than 1% yesterday. Today’s session could see further downward pressure on the local market as a key resistance level of 2950 may be tested.