Singapore Markets Morning Briefing - what you need to know for Wed Feb 22, 2012

Greece secured a second round of financing from the Eurozone but didn’t provide much inspiration.

Justin Harper, IG Markets Singapore head of research, said:

THE STI’s performance yesterday set the tone for global markets as they gave up gains to end flat despite the long-awaited Greek debt restructuring plan being approved.

European and US markets charted a similar course as the rescue plan failed to spark equities into life.

Few traders were expecting much upside once Greek and EU ministers announced they had agreed on the grounds for the second bailout fund. Markets had priced in the deal going ahead and once signed, profit-taking was the order of the day. The fact that the EUR didn’t move against the USD tells its own story of a muted reaction from the eurozone.

What the EU has actually done is simply pay the toll for Greece to now gain access to a long and treacherous road to economic recovery, with the possible hard shoulder of an eurozone exit. And along the way, the Greeks may even be stopping at an EU petrol station to ask for more cash to fill up the tank. The FTSE 100 slipped 0.3% while the CAC 40 and DAX also fell as the mood turned sour.

While the STI has now stayed above the magic 3000 for a week it will be looking for the next catalyst to add to these gains. Manufacturing PMI data is being released today, including flash numbers from China. This could be the biggest news of the day for giving direction to Asian bourses.

Meanwhile RBS noted:

We continue to feel the near term bias for yields is higher, and today 5yrs are testing near term yield resistance near 0.90%. 10yrs continue to look set to test their range high at 2.10%, and as discussed this morning we are more cautious about recommending investors line up loads of bids this time around ahead of there.

There are plenty of risks for the market that could push yields lower, but the near term calendar is relatively clear of them and if we continue to see the data improve, the bond market may pierce its 3+ month range. This is especially true if Jobless Claims are able to stay below 350k (released Thursday) and risk assets continue to perform.

The ongoing rally in the oil complex and unleaded gas in particular is a major concern as it is a drag on consumer spending power, but this will not show up in this week's data. As OD likes to say – the range holds, until it doesn't. A close over 2.10%, if it occurs, could mean a quick rise to 2.25%.

GFT, on the other hand, reported:

With no major U.S. economic data on the calendar today, it has been a quiet North American trading session. The euro consolidated for most of the day, taking its cue from equities, which oscillated in and out of negative territory.

Greece secured a second round of financing from the Eurozone but unfortunately this highly anticipated development failed to lift the euro. The problem is that doubts linger about the country’s ability to meet its debt obligations and default.

Greece still needs to persuade private bondholders to accept the PSI deal and if they fail to convince enough of them to do so, a credit event or default could be triggered. One level of uncertainty may have been removed from the market with the approval of the bailout but plenty of other loose ends remain.

OCBC Investment Research said:

With the US market closing mixed overnight and the Nikkei having a flat start earlier on, these are likely to cue the local bourse to a similar opening as well this morning.

Meanwhile, the STI continued to show resilience yesterday; despite retreating as much as 0.6% after the 0.1% higher opening, the index again rebounded strongly near the 3000 support to a 0.1% gain by the close.

And with today's tone likely to remain fairly muted, the index is likely to continue hovering just above the 3000 immediate support this morning; meanwhile, the subsequent base lies at the 2950 recent minor trough.

On the upside, the immediate obstacle is still pegged at around 3050 (support-turned-resistance), with the next resistance at the 3100 psychological resistance.