STI gains total 3.8% since 27 June

The futures market points to a firmer open for the STI, says IG Markets Singapore.

OCBC Investment Research said:

The muted showing on Wall Street overnight as well as the soft Nikkei start of +0.1% (although now up 0.4%) could see some caution creeping into the local bourse, especially after the recent strong gains.

As a recap, the STI again rose 1.1% yesterday to end at 2910.59; this bringing the total gains to 3.8% since 27 Jun. Although the daily MACD remains positive, we note that the index has risen above the upper Bollinger band.

In any case, we believe that the market would want to test the key 2905 support to see if it holds before buying in further.

Below 2905, the next support is around 2850.

But should the support hold, there is a good chance that the STI would try to fill the 2950-2987 gap, while 3000 remains the next formidable hurdle.

IG Markets Singapore meanwhile noted:

Tonight we have Singapore PMI data which is likely to be a nail biter as it could easily show mild expansion or edge into contraction. The effects of the eurozone crisis are being felt throughout the world and Singapore is exposed to this trade contagion.

While Singapore hasn't exactly decoupled itself from the eurozone, it relies less heavily on it for trade, instead aligning itself more with Asia.

While some may take credit for this shift, it has been in the pipeline before the crisis blew up as local companies spotted the huge growth potential in the region compared to mature and slow growth markets of Europe.

But the eurozone is still a major trading partner to Asia and, while not in technical recession, high unemployment, sluggish growth and biting cutbacks it may as well be.

All this leads to an almost foregone conclusion that the ECB will cut interest rates this week to try to spark some life back into eurozone economies. It seems the only thing growing in the region are calls for more monetary easing from the central bank.

And, unlike the Fed, the ECB looks likely to capitulate a lot sooner.

While equities enjoyed a resilient night it wasn’t the case for key commodities which fell on the low prospects for economic growth. Copper fell almost 1% while oil prices gave up some of their gains from Friday’s rally.

US Crude slipped 1.4% to trade at $83.75 a barrel while Brent slipped overnight by 0.5% to sit at $96.44.

Gold has been holding up well as it trades close to the $1600 ceiling. While it has failed to break through this resistance level it still remains within spitting distance having seen no sell-off last night.

On the currency markets, the euro and the dollar both suffered from weak factory output numbers leaving the pair little changed at $1.258.

The futures market points to a firmer open for the STI this morning. Having put on more than 2% in the last two days of trading, skeptics question when a bout of profit-taking might rear its head.