Singapore Markets Morning Briefing - what you need to know for Thurs March 8, 2012

US stocks rebounded and the Nikkei also started positive.

OCBC Investment Research said:

The strong rebound on Wall Street overnight and the positive Nikkei start (+1% currently) are likely to inspire the local bourse to a higher opening this morning.

Investors are also likely to take heart in the fact that the STI was able to hold above the key 2900 support; although the index fell 0.5% yesterday, it was off the early intraday 2906 low.

However, we still believe that any rebound is likely to be short-lived, given that the daily technical indicators are still pretty bearish.

Hence failure to clear the congestion zone around 2945-2960 could be another signal to watch. The main hurdle remains at 3000.

On the downside, 2900 is the first support, ahead of 2869 (38.2% retracement of rally from 2606 to 3031).

IG Markets Singapore meanwhile noted:

Traders seem to have taken their fingers off the panic button for the time being as improved US employment figures and a likely Greek debt swap boost risk sentiment.

Nerves have been on edge since Monday when China revised downwards its GDP growth forecasts. These jitters were exacerbated by the Greeks as its debt swap with private bondholders looked like it might be derailed.

Markets have been tumbling ever since with the STI dropping to its lowest level in more than one month. But the day ahead may hopefully snap the index’s losses with a more upbeat mood and slight rebound from US and European stocks.

The US saw 216,000 workers added last month to payrolls according to ADP figures, which support the optimism expected on Friday from non-farm payrolls figures.

Among the major averages, the Dow Jones Industrial Average was up 0.6% at 12837. The S&P was 0.7% higher at 1353 and the NASDAQ advanced 0.9% to finish at 2936.

Europe also reversed some of its recent losses with promising news that so far 40% of private bondholders of Greek debt have agreed to the write-down of their assets, including BNP, HSBC and Royal Bank of Scotland.

Greece’s threats to default on any of its bondholders who didn’t sign up seem to have worked. The fact that banks and financial institutions may be reluctant to ever buy Greek government debt again can be worried about another day.

RBS, on the other hand, reported (for 7 March 2012 trading):

It was a nothing of a day until the Hilsenrath article came out, which revived hopes of QE3 and boosted QE related trades (commodities up, equities up, dollar down, etc). Until then, we were patiently waiting for the Greek PSI to conclude tomorrow, and for payrolls on Friday.

Now we have another input into the conversation, for markets had reduced QE3 odds after Bernanke's testimony last week and are now boosting them back to some degree. Before the article was released we saw real money selling in 7s and other real money buying in 10s.

After, flows picked up and we had leveraged selling in 5s and 10s, and real money selling of 7s. In TIPS, we saw fast money buying of 3s, real money buying of 4s, real money buying of 10s, and net better selling in 30s. Total Treasury broker volume today was 98% of the 10-day average.