Singapore Markets Morning Briefing - what you need to know for Wed Feb 8, 2012

Mid-week trading is welcomed by good news.

OCBC Investment Research said:

With US stocks ending higher overnight and the Nikkei 225 index initiating a fairly strong start (+0.6% now), these are likely to inspire the local bourse as well this morning.

Following the bullish break above the 2920 vital resistance last Friday, the STI climbed further yesterday; this after it opened 0.2% higher before rallying to a 0.6% gain at the close.

And with today's sentiments likely to remain buoyant, we could see the index inching higher towards the immediate obstacle at the 3000 psychological resistance, with the subsequent resistance pegged at 3070 (support-turned-resistance).

On the downside, the 2931-2939 gap support is still the initial base to watch out for, with the subsequent support at 2874 (recent trough).

Meanwhile GFT reported:

Currencies and equities performed extremely well today with the EUR/USD rising to its highest level since December. The S&P 500 also hit an 8 month high but the performance of technology stocks was the most spectacular with the Nasdaq composite reaching levels last seen in December 2000.

The rally in risk was sparked by hope that this will be week that Greece finally announces a PSI deal. Bernanke’s bearish comments also helped by driving the U.S. dollar lower. The head of the U.S. central bank has not been swayed by the latest non-farm payrolls report and based on his continued concerns, QE3 is still on the table.

The prospect of more stimulus and the continuation of easy monetary policy helped U.S. equities turn positive for the day. As much as we can point out that today’s rally is based on nothing more than hope, the EUR/USD has performed extremely well, breaking out of its weeklong consolidation.

The fact that the U.S. dollar weakened against every major currency except for the Japanese Yen confirms that today’s rally is supported by an improvement in risk appetite. Whether the EUR/USD is able to hold onto its gains will be largely determined by developments in the coming days.

RBS, on the other hand, noted:

Even though today's data was minor, it continued to reinforce the trend of firming domestic data alongside rising global risk appetites. This is most clearly seen in European space, where our desk reported real money buying of semi-core and periphery and selling of Germany.

Equities continue to benefit as well, so the only surprise is perhaps that yields are not even higher than they are now, with 10s still below 2%. Then again, its "risk on" until it isn't, and the vicious market reversals of 2011 are still fresh in the memory of many investors and strategists alike.