STI set for weak open amidst 'economic despair' in Asia

The STI ended on 1 June 2012 at 2745.7, down more than 9% on its March high.

IG Markets Singapore said:

Only central banks can save us now. That seems to be the underlying message as market turmoil continues as the world’s major economies falter and flirt with recession.

Friday’s disappointing non-farm payrolls figures capped another dismal week for global equities as markets were already digesting poor Chinese manufacturing data and fear of implosion in the eurozone.

Investors reacted badly to a weak print of 69,000 for US job creation when a much larger number of 150,000 was expected.

This latest disappointment hammers home that the strong payroll numbers we saw in the first quarter were merely a false dawn. They were a flash in the pan buoyed by warm weather and not a sign that the US economy was powering back into growth mode.

This realisation sent investors running for the exit on Wall Street as the Dow Jones Industrial Average fell 2.2%, its biggest one-day drop since last December. The S&P 500 plummeted 2.5% while the NASDAQ fell 2.8%.

No-one is looking forward to the opening of Asian markets this morning with the prospects of some hefty falls ahead. After China’s downbeat manufacturing data last week, today starts with more negative news as non-manufacturing output comes in at 55.2, down from 56.1 in April.

The STI ended Friday at 2745.7, down more than 9% on its March high when it broke through the 3,000 level. With such dark clouds of economic despair hanging over Asia the 2700 level is likely to be tested this week.

OCBC Investment research meanwhile noted:

The more than 2% plunge on Wall Street last Friday night and the poor Nikkei start (-2.1% now) are likely to spook the local bourse to a sharp retreat as well this morning.

As a recap, the STI had already showed signs of breaking its long term uptrend support in the previous session with a 1% lower close.

And with today's tone likely to remain very pessimistic, we could see the index sinking towards the 2690 (minor trough) immediate support, as the subsequent base lies at the 2650 support (next minor trough).

On the upside, 2760 is now the newly established support-turned-resistance, with the subsequent obstacle pegged at 2830 minor peak.