STI closes with 0.2% gain after 1% surge

The index is forecast to slide lower in the direction of the 2800 psychological support, says OCBC.

Here’s more from OCBC Investment Research:

The retreat on Wall Street overnight and the poor Nikkei start (down 0.6% now) are likely to cue the local bourse to a lower opening this morning.

Despite surging as much as 1% yesterday afternoon, the STI ended the day with just a 0.2% gain; the 2860 immediate resistance has proven to be a rather tough obstacle to overcome in the near term.

And with today's tone likely to turn more downside biased, we could see the index sliding lower in the direction of the 2800 psychological support again.

Beyond that, we continue to see the subsequent support at the 2760 minor trough; the secondary resistance is pegged at the 2900 key support-turned-resistance.

IG Markets Singapore meanwhile noted:

With the bar set low for the ongoing EU summit, it always had plenty of upside potential to surprise markets. The big question is if a €120 billion growth plan is enough to reassure investors that the fortunes of the eurozone can quickly be reversed.

Traders will today pick over the details of the ambitious growth plan to gauge if it is workable and addresses the current problems blighting the 17-nation bloc. Early concerns centre on if all member states will sign up to the growth pact and where the money will come from.

During the abyss as investors waited for an announcement they were instead presented with more worrying economic news that saw German unemployment rise and Spanish bond yields edging above the danger zone of 7%.

This knocked the FTSE100 down 0.6%, the CAC 40 fell 0.4% while the DAX slipped 1.3%.

This did no favours for the euro as the single currency dropped below $1.25 and failed to regain any ground, leaving it trading at $1.244 this morning.

On Wall Street, the S&P 500 lost 0.2%, the NASDAQ dropped 1.1% while the Dow Jones Industrial Average fell 0.2%. But the numbers hide the fact that Wall Street had pared back some potentially bigger losses after rallying to the news of a EU growth plan.

This could give a driving force to markets in Asia which have been seeking a leg-up all week in light of any positive news, bar rumours of a new stimulus package for China. But the early signs don’t look good as Japanese and Australian stocks have opened weaker.