Singapore Markets Morning Briefing - what you need to know for Fri March 9, 2012

US stocks rallied overnight and the Nikkei gained 2%, along with the STI.

IG Markets Singapore said:

The bounce back continued last night as US stocks rallied on news that the Greek debt swap was almost at a successful conclusion.

The S&P 500 put on its biggest two-day advance of the year, gaining 1% last night while the tech-heavy NASDAQ was up 1.2%. The US has also seen risk-on sentiment returning thanks to improving jobs data.

This could get another boost tonight with non-farms payroll data hinting at another leap in employment which supports the continuing US economic recovery story.

All this points to a good day ahead for Asia, which is in the throngs of its own mini recovery. Both the STI and the Nikkei 225 gained 2% yesterday as they looked to reverse mid-week losses.

RBS, on the other hand, noted (for 8 March 2012 trading):

US investors awoke to risk ON with global stock markets rallying, commodities higher, and the dollar lower. Nothing changed in the NY session, with the main themes being optimism on the Greek PSI and QE3, and the moves came at the expense of the Treasury market which bear steepened throughout the duration.

The high of the day was at the buyback, but the bid was brief and Treasuries never recovered towards yesterday's marks. Contrary to the price action we saw better buying from central banks in 7s, 10s, and 30s, as well as leveraged buying in 10s and domestic real money selling in 5s. Our swaps flows were mixed without any major themes.

Total Treasury broker volume today was 90% of the 10-day average. In Mortgages, we saw mixed flows but skewed to better buying, 3.5s were 4 ticks tighter to swaps as one point but in the afternoon turned the other way. While they still closed ~2 ticks better, it felt as if there was some supply out of the originators ahead of payrolls. Origination was ~$2.25bn.

OCBC Investment Research meanwhile reported:

The continued recovery on Wall Street overnight and the strong Nikkei start (+1.2% currently) are likely to cue the local bourse to further gains at the open this morning.

With the STI rallying to a 2% higher close following a 0.5% gain at the open yesterday, this could provide the much needed confidence to investors that the recent sharp correction could be fairly short term in nature.

With the strong rebound off the 2900 key level seen yesterday, this critical level has been proven to be a vital resistance-turned-support; as long as this key support holds its ground, there is no major cause of concern for medium to long term investors.

Below that, we see the subsequent base at around 2874 (minor trough in Jan '12). On the upside, we still see 3000 as the key obstacle to overcome in the near term, with the subsequent resistance pegged at 3030 (key peak in Feb '12).