Singapore Markets Morning Briefing - what you need to know for Wed Feb 1, 2012

Double trouble on Wall Street and with the Nikkei could send ripples into the bourse today.

OCBC Investment Research said:

The mixed and muted reactions on Wall Street overnight, coupled with the negative Nikkei start (-0.2% at the moment) are likely to weigh slightly on local sentiments this morning.

As a recap, the STI posted a surprise gain yesterday despite starting the day in the read. Following a 0.3% loss at the open, the index recovered strongly in the late afternoon to a 0.6% gain by the close as trading volume picked up significantly.

But with today's tone likely to remain fairly neutral, we could see the index consolidating below the still unconquered key obstacle at 2916 (key support-turned-resistance) with the subsequent resistance pegged at the 3000 psychological level.

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

GFT, on the other hand, noted:

It may have been a mixed day for the U.S. dollar but there is no question the rally in the financial market is beginning to run out of steam. Currencies and equities have stalled at key technical levels and without a fresh dose of good news, we could see gains turn into losses.

Investors are running out of patience and unfortunately Greece has yet to reach a deal with its creditors and according to the Guardian, the Prime Minister is calling for a crisis meeting, in a sign that the talks may have hit a brick wall.

This evening, all eyes are on China who has manufacturing PMI numbers scheduled for release. All signs point to a soft landing for China this year but any major disappointments could tip the risk rally over.

RBS meanwhile reported:

USD/JPY remained heavy but overall lack of risk-seeking sentiment due to continued uncertainty in Europe and disappointing US data worked to the benefit of the USD versus the rest of the G10. EUR/USD dropped below 1.31 early in the New York session and remained below that level throughout the day.

The higher beta AUD and NZD weakened versus the USD as part of the broad pull-back in risk sentiment and USD/CAD remained elevated as a surprise negative GDP growth rate for November weighed on the CAD.

The European worries also pressured EUR/CHF, which traded around the 1.2040 level for most of the session. However, as we noted in Global Currency Weekly this week, we expect the SNB to defend 1.20 should it come under pressure and we view the SNB hiking the floor as unlikely at this stage.