Singapore Markets Morning Briefing - what you need to know for Tues Jan 31, 2012

The bourse is not likely to get much boost from Wall Street and the Nikkei.

OCBC Investment Research said:

The mild retreat on Wall Street overnight and the muted Nikkei start (-0.1% at the moment) are unlikely to provide any inspiration to the local bourse this morning.

With the STI having already retreated some 1% yesterday after facing strong selling pressure at the 2916 key support-turned-resistance, we could potentially see a further technical pullback by the index in the days ahead.

In the near term, the 2852-2860 gap support is still a relatively strong base but should that level be compromised, it will not be surprising to see the index retreating further south to the 2790 key resistance-turned-support.

Above the still unconquered obstacle at 2916, we continue to see the subsequent key resistance at the 3000 psychological level.

RBS noted:

We returned to the recurring pattern of a European based risk-off trade where risk assets recover after Europe goes home. The intraday low in the S&P500 occurred at 10:15 AM (-16 points), and since then it was a slow grind higher in equities following a day where European bourses posted -1% -1.5% losses.

Treasuries opened with a strong bull flattening bid, for with 5yrs running out of room as we approach 0.70%, investors seeking price appreciation are being forced further out the curve. The bid to Treasuries did not relent even as US equities rallied back – a mixture of events that are sure to make policy makers smile (Treasury yields lower and equities stable at higher levels).

Our flows were central bank buying of 7s, macro selling of the long end, and light domestic interest in 10s. The swap desk saw better receiving in 5yrs and 10yr spreads. Total Treasury broker volume today was 77% of the 10-day average.

GFT, on the other hand, reported:

The recent improvement in risk appetite has driven the U.S. dollar sharply lower against all of the major currencies. Today however was a day of recovery for the greenback which rose against everything except for the Japanese Yen.

In fact, the weakness of USD/JPY is quite significant because the pair tumbled for 3 days straight, falling to a 2 month low in the process. This would not be as big of a deal if USD/JPY was trading at 80 but it is moving dangerously close to its record low which means Bank of Japan and Ministry of Finance officials must be shaking in their seats.

This is a big week for both Europe and the U.S. – U.S. stocks have performed extremely well, recovering nearly all of its intraday losses. Everyone seems to have the buy on dip mentality with strong earnings from tech companies such as Apple driving the enthusiasm in the market.