Singapore Markets Morning Briefing - what you need to know for Mon May 7, 2012

Things are looking bad in local trading following significant retreat on Wall Street and Nikkei’s negative start.

OCBC Investment Research said:

The sharp pullback on Wall Street last Friday night and the very poor Nikkei start (-2.6% now) are likely spook the local bourse to a pessimistic opening as well this morning.

As such, the STI which already shown signs of a reversing south on Friday with a 0.3% loss, could retreat further this morning in the direction of the 2946 (recent trough) support.

Should this support be breached in the days ahead, the next vital base at 2900 (key resistance-turned-support) could then be tested.

On the upside, 3010 (minor peaks) remains the immediate obstacle to overcome, as the subsequent key resistance still lies at 3030 (various key peaks).

IG Markets Singapore meanwhile noted:

It is looking like deja vu for the US economy as another strong start to the year makes way for doom and gloom and talk of another false dawn.

And if Friday’s poor payrolls reaction on Wall Street is anything to go by, it looks like traders have banged in the final nail in the coffin for the green shoots of recovery.

The Dow Jones Industrial Average slumped 1.3% at 13038, the benchmark S&P 500 was 1.6% lower at 1369 while the NASDAQ plummeted 2.3%.

There was a dim ray of sunshine as February and March’s payrolls data were revised upwards but the bears took hold of April’s weak employment growth as a sign that the US economy would slipping back this year.

If this wasn’t reason enough to sit on the sidelines European elections are doing just as much damage to bullish sentiment as Friday’s weak employment figures. Sarkozy being toppled in France hasn’t been taken well although the Greek election results have exploded like a ticking time bomb.

A disgruntled Greek electorate has been waiting to vent their spleens at the latest round of austerity measures and yesterday they had their chance by ousting the ruling parties.

Once the dust settles the big questions will be what the incumbent political parties plan to do regarding the proposed budget cuts, their future role in the eurozone and whether to pull out of the euro.

So all in all, Asia has some very dark rain clouds swiftly moving across the region today and likely to remain for the week ahead.

While the STI had a topsy-turvy week last week moving in and out of the 3000 level, this week is likely to keep traders on their toes looking for any positive clues.

“Sell in May and go away” will be ringing in many traders’ ears this morning as they wake up to very grey, if not black, Monday.