SPI poised for flat open

IG Markets Singapore says the strong performance across Wall Street and Europe may not automatically lead to another upbeat session in Asia amidst so much uncertainty.

Here’s more from IG Markets Singapore:

Global markets have managed to pull together a two-day winning streak after another positive session yesterday but an underlying mood of fear still remains.

But the strong performance across Wall Street and Europe may not automatically lead to another upbeat session in Asia today with so much uncertainty in the air.

After such a firm start to the week, traders will be pinching themselves to check if they are dreaming, as nothing has changed in the eurozone sadly.

On Wall Street, the Dow Jones Industrial Average lifted 1%, the S&P 500 rose 1.1% while NASDAQ gained 1. 2%. US data last night was a mixed bag. House prices rose the second month in a row while consumer confidence dropped to its lowest level for four months.

Anyone having bought shares in Facebook’s IPO look away now – the stock is down 24% trading below $29.

In Europe, the FTSE 100 ended the day 0.65% higher, the DAX was up 1.2% while in France the CAC 40 edged up 1.4% last night to cap a solid night of gains.

But problems continue to stack up for the eurozone with the ill health of Spanish banks and the broader condition of the European banking sector developing into a major concern.

For investors when it comes to the eurozone, no news is good news. And there were no significant announcements yesterday which lifted equities, even though Spain’s handling of its banking crisis looks ominous.

For the bearish among us, this ebullient mood could just be the calm before the storm. Greek elections are looming next month while tomorrow we have an Irish referendum on the EU.

The Vix index – otherwise known as the fear gauge – is trading up at 21.6 currently, compared to an average of around 18. This is a pretty good indicator of the quiet panic waiting to unleash itself when the time is right.

In Asia, the spotlight may be on China today and growing expectations to launch a large scale stimulus plan. While the rest of the world would love to see China launch large scale infrastructure and growth plans the Chinese government is mindful of a knee-jerk reaction spending spree and the damage it could cause.

OCBC Investment Research meanwhile noted:

The US indices rallied more than 1% overnight, but the weaker US index futures (-0.2% now) and a poorer Nikkei start (-0.7% now) could take some shine off the local bourse.

This especially since the STI already had a second consecutive session of recovery yesterday (closed 0.5% higher) after rebounding off the 2763 support earlier this week.

For now, 2831 is the immediate resistance (recent minor peak) to overcome, with the subsequent obstacle lying at the 2900 key support-turned-resistance.

On the downside, 2730 minor resistance-turned-support is the subsequent base after the 2763 immediate support.