Singapore Markets Morning Briefing - what you need to know for Fri March 2, 2012

There was recovery in US equity markets and the Nikkei started strong.

IG Markets Singapore said:

US equity markets recovered last night to lay some solid foundations for an end of week flourish for the STI.

Stock markets quickly came out of their sulk over quantitative easing being snatched away to put in some good gains. Equities liked the fact that the US economy (lower jobless claims), Europe (falling Spanish and French borrowing costs) and China (improving PMI manufacturing data) are all showing signs of recovery.

The Dow Jones Industrial Average gained 0.2% although not enough to break into the 13,000 zone, the S&P 500 advanced 0.6% while NASDAQ put on 0.7%.

The STI and Asian bourses took their cue from US markets yesterday which had slumped on the back of dimming hopes for QE3. Asian traders hope the US will again provide the impetus for today’s session, but this time driving markets higher.

Singapore stocks had hit breached the 3,000 level in yesterday’s trading, showing a bullish sentiment was still in play, only to slide back below for the rest of the session. A bout of end-of-month profit-taking could be to blame along with QE3 being factored out of the market.

RBS meanwhile reported:

The Treasury market opened up on its back foot after European debt auctions (Spain and France) went well and China's PMI hit a 5-month high.

The pressure continued when ISDA said that there would be no triggering of payments on Greek CDS and then the 4-week moving average in jobless claims hit a new cycle low while early car sales came in above strong expectations. Credit rater Egan Jones later said that QE3 could trigger a US downgrade, or at least another ratings review from the company.

Treasuries got a brief bounce off their lows when the personal income data was weaker than hoped for and ISM mfg. was also below heightened expectations. Even so, it was a risk on or, better yet, riskless-off for today's (March 1) session.

Indeed, it felt like the market is still digesting yesterday's (February 29) big-block sales in TY futures. Treasuries traded quite poorly despite the fact that the ISM and the personal income data came in weaker than expected.

OCBC Investment Research, on the other hand, noted:

The rebound on Wall Street overnight and the strong Nikkei start (+0.7% now) are likely to inspire the local bourse to an optimistic opening as well this morning.

Over the past two sessions, the STI made attempts to overcome the 3000 psychological mark but failed to do so; despite opening 0.2% higher yesterday, the index slipped steadily for the rest of the day to close more than 0.5% in the red.

But with today's sentiments likely to improve significantly, we could see the index rebounding back in the direction of the 3000 psychological resistance again. A convincing break above this immediate obstacle will send the index towards the subsequent resistance at the 3031 recent peak.

On the downside, we still see the immediate base at the 2947 recent trough formed, followed by the subsequent support at the 2900 key resistance-turned-support region.