Singapore Markets Morning Briefing - what you need to know for Tues Feb 28, 2012

US markets closed flat and the Nikkei started weak.

IG Markets Singapore said:

We are likely to see the STI open in positive territory this morning, as US markets once again shrugged off early negative leads from Europe to finish the day well off their lows and back towards important levels for the market.

Having watched the STI break through the key psychological 3000 level but fail to hold above it, local traders may now find encouragement from the fact that the Dow and the S&P once again moved back toward levels that mean we are close to 4-year highs on those US benchmarks.

The Dow once again flirted with levels above 13,000 but did not manage to hold them into the close, edging back to finish the session flat. The S&P traded through the key level of 1370 but was also unable to sustain this by the closing bell. Both the S&P and Nasdaq did manage to close in positive territory. Well, marginally positive territory at least.

Early US trading was marred, as was the trading day in Asia and Europe, by the uncertainty surrounding the European debt saga and the apparent lack of support from the G20 for the beleaguered region. We are still a long way from the bottom of European debt issues and continued concerns over individual nations and the region as a whole. Consequently, it is likely volatility will remain in financial markets as the story continues to unfold.

OCBC Investment Research, on the other hand, noted:

The local bourse could continue to languish around current levels or even head lower after failing to hold above the key 2957 support yesterday; it closed 1% lower at 2946.78.

The weaker Nikkei start (down 0.5% after opening 0.7%) lower and the flat Wall Street close are unlikely to provide much inspiration as well.

Daily technical indicators continue to remain mixed to slightly more bearish, suggesting that the index may revisit 2900; although it should hold above 2869 (38.2% retracement of recent rally from 2606 to 3031).

On the upside, 2966 (centre of Bollinger band) will be the initial cap, ahead of the key 3000 hurdle.

GFT meanwhile reported:

Based on the recovery in U.S. equities and the rally in other currencies, investors were clearly pleased to see German lawmakers approve a second bailout for Greece.

The motion passed easily with 496 of the 591 members of the Bundestag lower house present in the chamber voting in favor of supplying Greece with a new EUR130 billion bailout package. To not do so would be “irresponsible” according to German Chancellor Angela Merkel. Although Germany’s contribution to the bailout has yet to be determined, they can expect to assume a large part of the costs.

The German Parliamentary vote was one of the major event risks for the euro this week and with this hurdle cleared so easily, the euro should be trading much higher. The problem however is that investors are very cautious about buying euros ahead of this week’s long term refinancing operation.