Singapore Markets Morning Briefing - what you need to know for Fri April 20, 2012

The STI may find itself struggling following bad news both from the US and Japan.

OCBC Investment Research said:

The second consecutive session of correction on Wall Street overnight and the poor Nikkei start (-0.2% now) are unlikely to provide any inspiration to the local bourse this morning.

Despite most US stocks retreating on Wednesday night, the STI bucked the trend yesterday with a positive close; after a 0.1% higher opening, the index recovered gradually to a 0.3% gain by the close.

But with today's tone likely to turn more downside biased, the index will hold its grounds at best or even drift lower through the day. For now, 3030 remains the vital obstacle to overcome, with the subsequent resistance marked at the 3060 support-turned-resistance.

On the downside, 2945 (recent minor trough) is still the immediate support, followed by the subsequent key base at the 2900 vital resistance-turned-support.

IG Markets Singapore meanwhile noted:

In this climate bad news trumps good news, especially when it is weaker data coming out of the world’s biggest economy. And that’s exactly what traders experienced last night as US unemployment claims, home sales and the Philly Fed manufacturing data all missed expectations.

This overshadowed the initial euphoria from Europe when Spain successfully sold €2.5 billion worth of bonds. However, it had to pay a high price in the 10-year period compared to January’s auction. Yields edged up from 5.4% to 5.74% while demand was strong.

But the champagne was put on ice after rumours that France was going to be downgraded circulated trading floors. French credit risk climbed to its highest level in three months.

Last night saw investors headed back to safe havens of US treasuries and German bunds which put some downward pressure on yields.

On Wall Street, the Dow Jones Industrial Average was down 0.5% at 12964. The S&P was 0.6% lower at 1377, while the NASDAQ shed 0.8% to finish at 3008.

Not even growing optimism over US corporate earnings could turn the tide of negative sentiment last night.

Bank of America and Morgan Stanley were the latest US behemoths to report earnings last night which were both boosted by higher trading revenue.

Risk assets did not experience the relief rally that was expected following the relatively successful eurozone bond auctions. Commodities were relatively flat after losing the momentum they picked up from whispers about China monetary easing.

Oil prices also slipped on the back of the poor US economic data reversing the gains made after an IMF report on global growth and Spain’s smooth debt sale boosted trader confidence.

WTI crude sits at $102.27 a barrel while Brent crude trades at $117.44.

In Singapore, the STI starts the day sitting in unfamiliar territory above 3000 points after making small gains yesterday. It may struggle to stay above this psychological mark today following last night’s downbeat mood.