Singapore Markets Morning Briefing - what you need to know for Tues May 8, 2012

Mild rebound is expected for the STI following a 2.2% loss on 7 May 2012.

OCBC Investment Research said:

The muted reactions on Wall Street overnight and the positive Nikkei start (+0.6% now) are likely to provide a temporary relief for the local bourse this morning.

As a recap, the STI dived sharply yesterday after taking cue from the pessimistic US and European market outlook; after opening nearly 1.5% lower, the index slipped further to a 2.2% loss by the close.

Following yesterday's sharp retreat, the index could potentially initiate a technical rebound today and possibly retest the newly established immediate support-turned-resistance at around 2950, with the subsequent resistance pegged at 3010 (various peaks).

Should this retest fail, the index could continue to descend towards the immediate base at the 2900 key resistance-turned-support; the subsequent base lies at 2852-2860 gap support.

IG Markets Singapore meanwhile noted:

There’s nothing like a crisis to start your week and Asia found itself on the fringes of one yesterday as panic spread from the eurozone.

Asia saw a brutal sell-off among equity traders yesterday as fears over what a new political landscape will do to the eurozone. While things may be clearer in France, Greece is unlikely to see the fog disappear for some time.

But while Asia burned, Europe and Wall Street took it all in their stride as traders reacted far more calmly. The Dow Jones Industrial Average was down 0.2% at 13009. The S&P was flat at 1370 while the NASDAQ was up a point finishing at 2958.

While the Greek stock market fell off a cliff losing 7% of its value, in France the CAC 40 gained 1.7% as traders welcomed President Hollande’s growth over austerity policy.

Fitch's reaffirmation of France's AAA rating in the wake of Hollande's victory also helped sentiment.
Even Spain’s third largest bank going cap in hand to the Spanish government for bailout cash did little to dampen the mood.

This calm is likely to reassure investors in Asia today that the eurozone is no more likely to fall apart than at the height of the financial crisis.

But there are still so many unknowns about how a new Greek government will deal with the proposed austerity measures and whether it should exit the euro.

Until then we just have a cloud of uncertainty as Greece scrambles to form an interim government before it goose-steps to the polls for a second time in June.