Singapore Markets Morning Briefing - what you need to know for Wed March 28, 2012

The STI faces strong downward pressure after moving back into the 3,000 zone, while the futures market points to a weaker opening.

IG Markets Singapore said:

The Bernanke Bounce didn’t last for long as US equity markets retreated from their highs last night.

While the bounce pushed Asian equities much higher yesterday there are fears the bears will be out in force to lead a pullback, repeating last night’s activity on Wall Street.

Despite some early ebullience brought about by fund managers buying top-performing stocks (aka end-of-quarter window dressing) Wall Street ended the session lower.

Among the major averages, the Dow Jones Industrial Average was down 0.3% at 13198. The S&P was 0.3% lower at 1413 and the NASDAQ shed 0.1% to finish at 3120.

But as the quarter comes to a close the benchmark S&P 500 is up 12% this year and few would have argued with those returns at the end of 2011.

Bernanke’s comments about possible quantitative easing have created ambiguous feelings among traders. First there was early euphoria that cheap dollars would once again flood the market and prop up risk assets. But now the dust has settled it highlights that all may not be as rosy in the garden of US economic recovery as first thought.

Last night, investors digested softer US home prices and consumer confidence data which had fingers hovering over the “risk off” button. As risk appetite fell, the US dollar gained ground against most of the majors, while equities and commodities slipped.

Yesterday’s standout performance came from Japan as the Nikkei 225 rocketed 2.4% erasing the losses suffered since last year’s earthquake. Japan’s index has been well supported by a weaker yen over the past few months and has outperformed the region.

However, today could be a different story with more than 200 Japanese companies going ex-dividend today.

OCBC Investment Research meanwhile noted:

Weaker Wall Street overnight and a poor Nikkei start (down 1%) are likely to see the STI opening lower on profit-taking this morning, especially after the index surged 1.5% higher yesterday.

Again, the key 3000 level will be tested – this time as a support; and if it should fail to hold, the STI could ease further towards 2950-2960 region.

On the upside, we continue to see 3031-3035 as the immediate hurdle, ahead of 3041 (upper Bollinger band).

While the tone has turned slightly more positive recently, the market does not appear to be convinced that the recent rebound was anything but technical. We note that the index has also covered a significant gap (3026-3105) and is thus looking slightly jaded.