Singapore Markets Morning Briefing - what you need to know for Wed March 14, 2012

US indices surged to a new high while the Nikkei started strong.

OCBC Investment Research said:

The surge by the US indices to another new multi-year high, together with the strong Nikkei start (+1.8% currently) is likely to inspire the local bourse to a great start this morning.

As a recap, the STI had started to show some signs of recovery yesterday; after a 0.5% higher opening, the index climbed steadily for the rest of the session to end more than 0.9% in the black.

And with today's tone likely to remain buoyant, we could see the index breaking out of its 1-month downtrend channel and above the 3000 key psychological resistance with relative ease, before heading for the next resistance at around 3030 (key peak in Feb '12).

On the downside, we still see the key support at 2900 (key resistance-turned-support), followed by the subsequent base at 2874 (minor trough in Jan '12).

IG Markets Singapore, on the other hand, noted:

Traders will be hoping the strong session on Wall Street last night provides some impetus for a good day ahead for the STI. Yesterday the local market ended up 0.9% to move within touching distance of the psychological 3,000 mark.

The growing optimism coming out of the US is likely to warm the hearts of traders across the region, having already boosted risk-on mentalities among American investors.

Among the major averages, the Dow Jones Industrial Average was up 1.7% at 13178. The S&P advanced 1.8% to 1396 and the NASDAQ climbed 1.9% to finish at 3040.

A three-pronged attack on the bears last night pushed US and European stocks higher. The Fed gave a rosier outlook for the US economy in its FMOC monthly meeting, retail sales jumped jumped 1.1% in February, the most in five months while 15 out of the 19 largest US banks passed stress tests.

But of course all this good news means QE3 slips further down the agenda and timetable for the Fed which put some downward pressure on commodities. Spot gold was one of the biggest casualties falling more than 1% to its lowest price since January while gold futures for April delivery fell below $1700 as hopes of cheap US liquidity fade.

RBS meanwhile reported (for 13 March 2012 trading):

The bulk of the day saw a steepening selloff into the 10yr auction, sparked by better growth data in the US, most notably the US retail sales report.

Last Friday saw street-wide downward revisions to GDP forecasts after the Trade report, but today's retail sales data caused these forecasts to be revised back higher to near 2% for Q1. "Growth" trades certainly liked it, with oil rebounding, other commodities (except gold) following suit, and equities rallying again.

Treasuries suffered, as a notable bearishness due to the ongoing decent domestic data permeated the market.