Singapore Markets Morning Briefing - what you need to know for Wed April 18, 2012

Nikkei started strong following positive news from both Europe and the United States.

IG Markets Singapore said:

Strong gains on Wall Street and Europe last night bode well for a firm opening across Asian markets this morning, although there was still an underlying note of caution.

An easing of tensions in Europe while disappointing US housing starts and factory output data sent out mixed messages last night but the bulls won the day.

The S&P 500 rose 1.6% to 1391, within touching distance of the 1400 threshold it breached last quarter while the Dow Jones Industrial Average went up 1.5%. The best-performing index was the NASDAQ which surged 1.8%.

The number of US companies showing strong earnings growth continues to swell with Goldman Sachs and Coca-Cola added to their names to the list.

In Europe, the FTSE 100 went up 1.8% while the DAX shot up 2.7%.

The yields on Spanish 10-year bonds have edged away from the dangerous 6% mark although Thursday offers a stronger test of faith with another decisive debt auction.

Sentiment in Europe was also helped by a strong German ZEW index and the pledge of Japan to offer $50 billion to boost IMF firepower for the euro crisis. Japan relies heavily on Europe to buy its exports so this is a good example of economic altruism.

In Singapore today, the Q1 earnings season kicks off with Cambridge Industrial Trust, CapitaMall Trust and Keppel Land. Commodity players could spring a few surprises while property players are likely to hold steady in the face of cooling measures.

As always, the banking sector will be closely watched to gauge the underlying strength of the economy. With last weeks’ uplifting 9.9% Q1 GDP growth followed by downbeat export numbers yesterday, traders could do with more guidance from the financial sector as to the economy’s true health.

OCBC Investment Research meanwhile noted:

The rally on Wall Street overnight and the strong Nikkei start (+1.6% now) are likely to boost local sentiments this morning.

As a recap, the STI continued to consolidate in a muted fashion yesterday; after opening about 0.2% higher, the index moderated to a 0.2% loss by the close as trading volume dwindled further.

But with today's tone likely to improve significantly, we could see the index overcoming the 3005 (recent minor peak) immediate resistance with relative ease before attempting another break at the 3030 vital obstacle again.

On the downside, 2945 (recent minor trough) is still the immediate support, followed by the subsequent key base at the 2900 vital resistance-turned-support.