Singapore Markets Morning Briefing - what you need to know for Tues Feb 14, 2012

Muted Nikkei start could cap gains from Wall Street rebound.

OCBC Investment Research said:

The rebound on Wall Street overnight is likely to provide some mild inspiration for the local bourse this morning although the muted Nikkei start (-0.1% now) could possibly cap the gains.

Meanwhile, the STI showed further signs of resilience in trading yesterday; after a 0.1% gain, the index climbed steadily for the rest of the day to end nearly 0.6% higher.

And with today's tone likely to remain slightly more upside biased, we could see the index inching higher in the direction of the 3000 key psychological resistance, with the subsequent obstacle pegged at the 3070 support-turned-resistance.

On the downside, we still see the immediate base at the 2931-2939 gap support, followed by the next support at 2874 (recent trough).

Meanwhile RBS noted:

With no data releases during US hours the week started off fairly quiet. EUR/USD failed to hold onto its overnight gains despite US equities pushing higher into the US close.

With the Greek austerity package voted through parliament, focus shifts squarely on the Eurogroup meeting on Wednesday and one source said the EU would decide on the Greek package "as a whole" at the 15 February meeting, which may include a PSI deal.

Elsewhere, USD/JPY was rangebound and closed the day essentially unchanged. EUR/JPY may struggle to hold onto recent gains as rate support appears to be lacking.

GFT, on the other hand, reported:

The Japanese yen weakened against the commodity currencies but remained relatively unchanged against the U.S. dollar, euro, and Swiss Franc. Economic data released over the weekend showed that Japan’s economy shrank more than expected.

Preliminary gross domestic product contracted 0.6 percent in the fourth quarter of 2011 as the global economic slowdown, Thai floods and a strong yen dealt a blow to the economy just as it was emerging from a recession brought on by last March’s devastating earthquake.

Japan’s economy shrank an annualized 2.3 percent in the fourth quarter, more than the expected 1.3 percent. Yesterday’s report increases pressure on Bank of Japan officials meeting today and tomorrow to consider more monetary easing as gains in the yen continue to magnify losses for companies from Sony to Panasonic to Nissan.

Starting in 2012, Japan still faces two major headwinds; the continued strength of the yen and the contagion from the European debt crisis.