STI set for lower open

There were muted reactions on Wall Street on Friday and the Nikkei started weak.

OCBC Investment Research said:

The continued muted reactions on Wall Street last Friday night and the weak Nikkei start (down 0.2% now) could keep the local bourse on the back-foot this morning.

The STI inched higher last Friday but still fell short of testing the 3090 key resistance; after a 0.5% higher opening, the index range traded for the rest of the session before closing just a tad above its opening level.

With today's tone unlikely to see any significant improvement, we could see the index consolidating around current levels with the immediate support still marked at the 3040 resistance-turned-support.

Below that, the subsequent base lies at the 3005 minor troughs. On the upside, the immediate obstacle is still pegged at the 3090 key peaks, with the subsequent obstacle pegged at the 3160 support-turned-resistance.

IG Markets meanwhile noted:

Markets were buoyed by the launch of the iPhone 5 and Apple breaking through $700 a share but traders remained cautious over rumours that Spain was working on a behind-the-scenes rescue plan.

Trader talk centred on speculation that the Spanish government was looking at controversial yet huge cost-saving pension reforms while increasing its retirement age.

If it can pull these off, it would reduce the tension still circling the eurozone despite positive action from the ECB to provide a backstop to weak economies. The euro did creep back up to $1.297 but couldn’t break through the psychological $1.30 barrier.

On the commodity markets, oil continues to confound traders which expected to rally after QE3. Instead it moved sharply in the opposite direction although there is still a bullish undertone to black gold.

US crude trades at $92.61 a barrel this morning while Brent sits at $112.26. Of the IG clients trading US crude we have 71% going long, evidence of the upward trend expected.

Gold has been edging up and many traders expect it to be first in the queue when the real effects QE3 hit the market, acting as a store of wealth and inflation-protector. Gold trades at $1770 an ounce this morning.

On the local market, the STI is looking at a slightly lower open based on the moves we’ve seen in global equities since Friday’s close.